Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows:
Floyd $50,000
Merriam 23,000
They agreed to admit Ramelow into the business for a one-fifth interest in the new partnership. Ramelow contributes $27,000 cash in exchange for the partnership interest. Assume that Floyd and Merriam shared profits and losses in a 3:1 ratio before the admission of Ramelow. Which of the following is the correct journal entry to record the above admission?
a. Cash 27,000
Ramelow, Capital 27,000
b. Cash 27,000
Merriam, Capital 7,000
Floyd, Capital 20,000
c. Merriam, Capital 20,000
Floyd, Capital 7,000
Ramelow, Capital 27,000
d. Cash 27,000
Floyd, Capital 5,250
Merriam, Capital 1,750
Ramelow, Capital 20,000
Answers: 2
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