Answer:
1a. Hylands capital $90,000 and Reddick capital $180,000
1b. Hylands capital $90,000, Reddick capital $180,000 and Nole capital $90,000
1c. Hylands capital $101,250, Reddick capital $196,875 and Nole capital $106,875
2a. Debit Nole, capital $90,000
Credit Hylands, capital $90,000
2b. Debit Cash $90,000
Credit Hylands, capital $90,000
2c. Debit cash $135,000
Credit Hylands, capital $101,250
Credit Reddick, capital $16,875
Credit Nole, capital $16,875
Explanation:
1a and 2a. The transaction between Hylands and Nole is a sale on Nole's capital to Hylands at $100,000. Thus, the effect of this on partnership's book is the transfer of partner's capital from Nole to Hylands. The entry of transfer is to debit Nole's capital and credit Hylands capital in the amount of $90,000. Hylands pays Nole a greater amount than the capital he receives in the partnership. Partners capital after the transaction is Reddick $180,000 same amount before the acquisition and Hylands capital is $90,000, the total capital of Nole before the transaction.
1b and 2b. First, let's compute if the acquisition is at bonus
Total contribution $270,000 + $90,000 = $360,000
$360,000 x 25% = $90,000 (interest)
Therefore, $90,000 contributed capital by Hylands compared to $90,000 interest is the same so there is no bonus.
In this purchase of interest, the total contribution of partners is $360,000 ($270,000 old contribution plus $90,000 investment of Hylands). The capital each partners is; Hylands $90,000, Reddick $180,000 and Nole $90,000. To record the transaction, we have to debit the cash received by the partnership in the amount of $90,000 and credit Hylands' capital in the amount of $90,000.
1c and 2c. First, let's compute if the acquisition is at bonus.
New capital contribution $135,000 + 90,000 + 180,000 = $405,000
$405,000 x 25% = $101,250
Therefore, $135,000 contributed capital by Hylands compared to $101,250 interest acquired, there is difference of $33,750 served as bonus. Hylands pays greater amount than the interest acquires, therefore there is bonusto od partners divided equally by Nole and Reddick.
$135,000 - $101,250 = $33,750 / 2 = $16,875 (bonus to Nole and Reddick each)
In this purchase of interest, the total contribution of partners is $405,000 ($270,000 old contribution plus $135,000 investment of Hylands). The capital each partners is; Hylands $101,250, Reddick $196,875 ($180,000 + $16,875) and Nole $106,875 ($90,000 + $16,875). To record the transaction, we have to debit the cash received by the partnership in the amount of $135,000 and credit Hylands' capital in the amount of $101,250, Credit Nole capital $16,875 to recognize the bonus and another credit to Reddick capital in the amount of $16,875.
