Anna and Naomi are partners.Anna has a capital balance of $49,000 and Naomi has a capital balance of $43,000.Gary invested $27,000 to acquire an ownership interest of $23,000.Which of the following is true of the partnership journal entry to record the receipt of Gary's contribution? (Assume the existing partners equally divide the bonus. )

Question

Quizplus · Accepted Answer

When a new partner is admitted to the partnership, the existing partners divide the bonus or goodwill among themselves in their profit and loss sharing ratio. In this case, Gary's ownership interest is $23,000 ($27,000 - $4,000 bonus to the existing partners). Therefore, to record the receipt of Gary's contribution, we will debit Cash for $27,000 (the actual amount received) and credit Gary, Capital for $23,000 (his ownership interest).

Anna and Naomi Are Partners