Olive Oil Imports is a partnership owned by Magda Stavros and Giannis Metaxas. The partners share profit on a 3:2 basis, respectively. On January 1, 2017, they have capital balances of $95,000 and $65,000, respectively. On that day, Magda and Giannis agree to admit Iona Xanthos to the partnership in exchange for an investment of cash into the partnership.
Instructions
(a) Prepare the journal entry to record the admission of Xanthos on January 1 under each of the following independent assumptions:
1. Xanthos invests $65,000 cash for a 331⁄3% ownership interest. This is an investment of assets.
2. Xanthos invests $95,000 cash for a 331⁄3% ownership interest. This is an investment of assets.
(b) For each of these alternatives, indicate the balance in each partner's capital account and total partners' equity after Xanthos is admitted to the partnership.