Business, 03.03.2020 22:29 iyeshaik

Problem 12-04A a-b At April 30, partners’ capital balances in Ivanhoe Company are G. Donley $48,000, C. Lamar $48,000, and J. Pinkston $15,000. 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.

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Answer from: ineedhelp2285

Question is incomplete Complete question is given below

Explanation:

Problem 12-04A a-b At April 30, partners’ capital balances in Ivanhoe Company are G. Donley $48,000, C. Lamar $48,000, and J. Pinkston $15,000. 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.

a. Journalize the admission of Terrell under each of the following independent assumptions.

(1) Terrell purchases 50% of Pinkston's ownership interest by paying Pinkston $15,400 in cash.

(2) Terrell purchases 33 1/3% of Lamar's ownership interest by paying Lamar $15,600 in cash.

(3) Terrell invests $60,200 for a 30% ownership interest, and bonuses are given to the old partners.

(4) Terrell invests $41,400 for a 30% ownership interest, which includes a bonus to the new partner.

b. Lamar's capital balance is $38,200 after admitting Terrell to the partnership by investment. If Lamar's ownership interest is 20 % of total partnership capital, what were (1) Terrell's cash investment and (2) the bonus to the new partner?

Solution

a. Journal Entries:

No.Account Titles Debit Credit

1Pinkson, Capital 7,500

Terrell, Capital 7,500

2Lamar, Capital 16,000

Terrell, Capital 16,000

3Cash 60,200

Terrell, Capital 51,360

Donley, Capital 4,420

Lamar, Capital 3,536

Pinkston, Capital 884

4Cash 41,400

Donley, Capital 2,160

Lamar, Capital 1,728

Pinkston, Capital 432

Terrell, Capital 45,720

Computation:

a.(1) Capital of Terrell = $15000 x 0.50 =$ 7500

a.(2) Capital of Terrell = $48,000 x 1/3 = $16,000

a.(3) Capital of Terrell = $171,200 x 0.30 = $51,360

Old Partners bonus = $60,200 - $51,360 = $8,440

Capital of Donley = $8,440 x 5/10 = $4420

Capital of Lamar = $8,840 x 4/10 = $3,536

Capital of Pinkston = $8,840 x 1/10 = $884

a.(4) Terrel Capital = $152,400 x 0.30 = $45,720

New Partner Bonus = $45,720 - $41,400 = $4,320

Donley Capital = $4,320 x 5/10 = $2,160

Lamar Capital = $4,320 x 4/10 = $1,728

Pinkston Capital = $4,320 x 1/10 = $432

b.(1) Total Capital after Admission = $38,200 / 0.20 = $191,000

Total Capital before Admission = $48000 + $48000 + $15000 = $110,000

Cash Investment by Terrell = $191,000 - $111,000 = $80,000

b.(2) Decrease in Lamar's Capital = $48,000 - $38,200 = $9,800

Bonus to New Partner = $9,800 / 0.40 = $24,500

Answer from: Quest

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Answer from: Quest

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Problem 12-04A a-b At April 30, partners’ capital balances in Ivanhoe Company are G. Donley $48,000,...