Answered Essay: The T & J Partnership has total partner's equity of $100,000, which is made up of Terry, Capital, $40,000,

Problem 3 The T&J Partnership has total partners equity of $100,000, which is made up of Terry Capital, $40,000, and Jeff, Capital, $60,000. The partners share net income and loss in a ratio of 7:3 with Terry 7 and Jeff 3. Prepare the journal entry to record the admission of Tom under each of the following assumptions: 1. Terry withdraws by selling his entire interest to Tom for $50,000. No one withdraws and Tom is admitted to the partnership and is given a 40% interest in equity by investing cash of $150,000.

The T & J Partnership has total partner’s equity of $100,000, which is made up of Terry, Capital, $40,000, and Jeff, Capital, $60,000. The partner’s share net income and loss in a ratio of 7: 3 with Terry 7 and Jeff 3. Prepare the journal entry to record the admission of Tom under each of the following assumptions: Terry withdraws by selling his entire interest to Tom for $50,000. No one withdraws and Tom is admitted to the partnership and is given a 40% interest in equity by investing cash of $150,000.

Expert Answer

 

a)
Journal entry
Terry’s capital a/c 40000
               Tom’s capital a/c 40000
b)
Terry’s capital 40000
Jeffs capital 60000
Tom’s capital 150000
Total capital 250000
Tom’s share 40%
Tom’s capital balance 100000
Remaining amount 50000 (150000-100000)
50,000 in ratio of 7:3 to tom and Jeff
Terry’s share 35000 (50000*7/10)
Jeff’s hare 15000 (50000*3/10)
Cash 150000
            Terry’s capital balance 35000
             Jeff’s capital balance 15000
            Tom’s capital balance 100000
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