Question

At April 30, partners’ capital balances in PDL Company are G. Donley $52,000, C. Lamar $48,000, and J. Pinkston $18,000. The income sharing ratios are 5 : 4 : 1, respectively. On May 1, the PDLT Company is formed by admitting J. Terrell to the firm as a partner. Your answer is partially correct. Try again. Journalize the admission of Terrell under each of the following independent assumptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.) (1) Terrell purchases 50% of Pinkston’s ownership interest by paying Pinkston $16,000 in cash. (2) Terrell purchases 331/3% of Lamar’s ownership interest by paying Lamar $15,000 in cash. (3) Terrell invests $62,000 for a 30% ownership interest, and bonuses are given to the old partners. (4) Terrell invests $42,000 for a 30% ownership interest, which includes a bonus to the new partner.

Answer 1

Solution and Explanation:

Number Accounts Titles and explaination Debit Credit    

1. JP Capital ($18000 divided by 2) 9000      

T, capital                                                          9000    

( To record JP’s 50 percent share purchased by T)      

2 CL, Capital ($48000 multiply with 33.33 percent) 16000    

T, Capital                                                                         16000    

( To record CL’s 33.33 percent share purchased by T)            

3. Cash                                               62000      

GD, Capital $\{(\ 62000-\ 54000) * 5 / 10$          4000    

CL, Capital                                                  3200    

JP, Capital                                                    800    

T, Capital                                                 54000    

(To record amount invested by T and bonuses to old partners)      

4. Cash       42000      

GD, Capital 3000      

CL, capital 2400      

JP, capital 600      

A, capital                                 48000    

( To record amount invested by T and bonus to new partners)