Amar Harb purchased one-half of Jordan Henry’s interest in the Vale and Henry partnership for $29,000. Prior to the investment, land was revalued to a market value of $125,000 from a book value of $80,000. Tony Vale and Jordan Henry share net income equally. Henry had a capital balance of $30,000 prior to these transactions.
a. Provide the journal entry for the revaluation of land.
b. Provide the journal entry to admit Harb.
Answer:
a.
Land 45,000
Tony Vale, Capital 22,500
Jordan Henry, Capital 22,500
($125,000 – $80,000) × 50%.
b.
Jordan Henry, Capital 26,250
Amar Harb, Capital 26,250
($30,000 + $22,500) × 50%.
