Question

the struter partnership has total partners equity of $660,000, which is made up of main, capital, $462,000, and frist, capital, $198,000. the partners share net income and loss in a ratio of 77% to main and 23% to frist. on november 1, adison is admitted to the partnership and given a 20% interest in equity and a 20% share in any income and loss. prepare journal entries to record the admission of adison for a 20% interest in the equity and a 20% share in any income and loss under independent assumption. (1) record the admission of adison with an investment of $165,000 for a 20% interest in the equity and a 20% share in any income and loss. (2) record the admission of adison with an investment of $200,000 for a 20% interest in the equity and a 20% share in any income and loss. (3) record the admission of adison with an investment of $135,000 for a 20% interest in the equity and a 20% share in any income and loss. view transaction list journal entry worksheet record the admission of adison with an investment of $135,000 for a 20% interest in the equity and a 20% share in any income and loss. note: enter debits before credits transaction general journal debit credit (3)

Explanation:

Step1: Calculate total equity after Addison's investment

The original partners' equity is $660,000. Addison invests $135,000. So the new total equity is $660,000 + $135,000=$795,000.

Step2: Determine Addison's equity share

Addison is given a 20% interest in equity. So Addison's equity share is 0.20×$795,000 = $159,000.

Step3: Calculate bonus to existing partners

The bonus to existing partners is Addison's equity share - Addison's investment. So it is $159,000 - $135,000=$24,000.

Step4: Allocate bonus to existing partners

The existing partners share net - income and loss in a ratio of 77% to Main and 23% to Frist.
Main's share of bonus = 0.77×$24,000 = $18,480.
Frist's share of bonus = 0.23×$24,000 = $5,520.

Step5: Record journal entry

Debit Cash for Addison's investment of $135,000. Debit Main, Capital for $18,480 and Frist, Capital for $5,520. Credit Addison, Capital for $159,000.

Transaction	General Journal	Debit	Credit
	Main, Capital	$18,480
	Frist, Capital	$5,520
	Addison, Capital		$159,000

Answer:

Transaction	General Journal	Debit	Credit
	Main, Capital	$18,480
	Frist, Capital	$5,520
	Addison, Capital		$159,000