Table 12-5
Jim and Joe are partners agreeing to share profits and losses in a 2:6 ratio, respectively. Business has been profitable and they have decided to admit Jewel to the partnership for a cash investment. The balances in Jim and Joe's capital accounts are presently $240,000 and $260,000, respectively.
-Refer to Table 12-5.If Jewel is given a 20% interest in the partnership in exchange for $90,000 cash,the entry to record her investment includes a:

Question

Quizplus · Accepted Answer

Jewel's 20% interest implies the total partnership value is $450,000 ($90,000 / 20%). The existing capital is $500,000 ($240,000 + $260,000), so Jewel's capital should be credited for $118,000 to reflect her 20% interest in the new total capital of $590,000 ($500,000 + $90,000).

Table 12-5 Jim and Joe Are Partners Agreeing to Share Profits and Profits