Solutions Guide: Please do not present as your own
Solutions Guide: Please do not present as your own. I sometimes post solutions that are totally mine, from the book’s solutions manual, or a mix of my work and the books solutions manual. But this is only meant as a solutions guide for you to answer the problem on your own. I recommend doing this with any content you buy online whether from me or from someone else.
Assume that Benson does not retire from the partnership described in Requirement 1. Instead, Rhodes is admitted to the partnership on February 1 with a 25% equity. Prepare journal entries to record Rhodes's entry into the partnership under each of the following separate assumptions (a) Rhodes invests $200,000 (b) Rhodes invests $145,000 c) Rhodes invests $262,000
a)
|Feb. 1 |Cash |200,000 | |
| | Rhodes, Capital* | |200,000 |
| | To record admission of Rhodes. | | |
| |*Supporting calculations | | |
| | $168,000 + $138,000 + $294,000 = $600,000 | | |
| | ($600,000 + $200,000) x 25% = $200,000 | | |
| | Thus, no bonus is received or paid. | | |
b)
|Feb. 1 |Cash |145,000 | |
| |Meir, Capital ($41,250* x 3/10) |12,375 | |
| |Benson, Capital ($41,250* x 2/10) |8,250 | |
| |Lau, Capital ($41,250* x 5/10) |20,625 | |
| | Rhodes, Capital | |186,250 |
| | To record Rhode’s admission and bonus. | | |
| |* Supporting calculations | | |
| | ($600,000 + $145,000) x 25% = $186,250 | | |
| | $145,000 - $186,250 = $(41,250) | | |
| | Thus, a bonus is paid to new partner. | | |
c)
|Feb. 1 |Cash |262,000 | |
| | Meir, Capital ($46,500* x 3/10) | |13,950 |
| | Benson, Capital ($46,500* x 2/10) | |9,300 |
| | Lau, Capital ($46,500* x 5/10) | |23,250 |
| | Rhodes, Capital | |215,500 |
| | To record admission of Rhodes and bonus to old partners. |
| |* Supporting calculations | | |
| | ($600,000 + $262,000) x 25% = $215,500 | | |
| | $262,000 - $215,500 = $46,500 | | |
| | Thus, old partners receive a bonus. | | |
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