EX 12-11 Admitting new partners who buy an interest and contribute assets

The capital accounts of Aaron Garner and Ricardo Fernandez have balances of $180,000 and $120,000, respectively. Aisha Carpenter and Isabel Diaz are to be admitted to the partnership. Carpenter buys one-fifth of Garner’s interest for $50,000 and one-fourth of Fernandez’s interest for $32,000. Diaz contributes $90,000 cash to the partnership, for which she is to receive an ownership equity of $90,000.

a. Journalize the entries to record the admission of (1) Carpenter and (2) Diaz.
b. What are the capital balances of each partner after the admission of the new partners?


Answer:

a. (1) Aaron Garner, Capital (20% × $180,000) 36,000
Ricardo Fernandez, Capital (25% × $120,000) 30,000
Aisha Carpenter, Capital 66,000
(2) Cash 90,000
Isabel Diaz, Capital 90,000

b. Aaron Garner, Capital ($180,000 – $36,000)…………… $144,000
Ricardo Fernandez, Capital ($120,000 – $30,000)…… 90,000
Aisha Carpenter……………………………………………… 66,000
Isabel Diaz…………………………………………………… 90,000