Assume that Partners A and B each report a Capital Account of $400,000. Partner C wants to join the partnership as an equal one-third partner. Because the partnership has been very profitable, Partners A and B require Partner C to contribute $760,000 in cash to the partnership in return for a one-third interest. Assume that Partners A and B share profits 40% and 60%, respectively, prior to the admission of Partner C. After admission of Partner C, Partners A and B retain their relative proportion of profit allocation after granting Partner C a 25% profit-allocation interest. Use the Goodwill Method to record the journal entry on the books of the partnership to reflect the admission of Partner C. What is Partner A's capital after Partner C is admitted to the partnership? O $400,000 O $520,000 O $904,000 O $568,000
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
