Question

the struter partnership has total partners equity of $700,000, which is made up of main, capital, $490,000, and frist, capital, $210,000. the partners share net income and loss in a ratio of 81% to main and 19% 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 $175,000 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 $210,000 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 $145,000 for a 20% interest in the equity and a 20% share in any income and loss.

Explanation:

Step1: Record cash receipt

When Addison invests cash, we debit the Cash account for the amount of the investment.
Debit Cash [amount of investment]

Step2: Credit Addison's capital account

We credit Addison, Capital for the amount that represents her 20% interest in the equity.
Credit Addison, Capital [amount of investment]

(1)

Debit: Cash $175,000
Credit: Addison, Capital $175,000

(2)

Debit: Cash $210,000
Credit: Addison, Capital $210,000

(3)

Debit: Cash $145,000
Credit: Addison, Capital $145,000

Answer:

(1) Debit: Cash $175,000; Credit: Addison, Capital $175,000
(2) Debit: Cash $210,000; Credit: Addison, Capital $210,000
(3) Debit: Cash $145,000; Credit: Addison, Capital $145,000