Floyd and Merriam start a partnership business on June 12,2019.Their capital account balances as of December 31,2020 stood as follows: Floyd and Merriam share profits and losses equally.They agreed to dissolve the partnership and start a new one,admitting Ramelow for one-half share in the capital in exchange for land with a market value of $66,000.Which of the following is the correct journal entry to record the introduction of Ramelow as a partner?

Question

Floyd and Merriam start a partnership business on June 12,2019.Their capital account balances as of December 31,2020 stood as follows:  Floyd and Merriam share profits and losses equally.They agreed to dissolve the partnership and start a new one,admitting Ramelow for one-half share in the capital in exchange for land with a market value of $66,000.Which of the following is the correct journal entry to record the introduction of Ramelow as a partner?

Quizplus · Accepted Answer

Total Capital = $51,000 + $19,000 + $66,000 =$136,000
Ramelow Capital = $136,000 / 2 = $68,000
Land debit is $66,000.
$68,000 - $66,000 = $2,000 bonus to new partner.
$2,000 bonus to new partner is distributed to old partners in 50/50 ratio.

Floyd and Merriam Start a Partnership Business on June 12,2019