Table 12-7
Bill, Bob, and Bo, are partners in the Trendy Company, a retailer of inexpensive kids' wear. They share profits and losses in a 1:4:5 ratio and have decided to expand their business territory. They have agreed to admit Burt to the partnership for a cash investment. Their capital balances are currently $60,000, $100,000, and $140,000, respectively.
-Refer to Table 12-7.Assuming Burt contributes $80,000 for a 20% interest,the entry to record his investment in the partnership includes a:

Question

Quizplus · Accepted Answer

The total capital balance before Burt's investment is $300,000 ($60,000 + $100,000 + $140,000). Burt's 20% interest in the partnership is worth $60,000 ($300,000 x 20%). Since Burt contributes $80,000 in cash, the entry to record his investment is:
Debit: Cash $80,000
Credit: Burt, capital $76,000
Credit: Bill, capital $2,000 ($76,000 x 1:4)
Credit: Bob, capital $8,000 ($76,000 x 4:5)
Credit: Bo, capital $10,000 ($76,000 x 4:5)

Table 12-7 Bill, Bob, and Bo, Are Partners in the Trendy Company