Question
14) A summary balance sheet for the partnership of Maddy, Nelson and Olsen on December 31, 2014 is shown below. Partners Maddy, Nelson and Olsen
14) A summary balance sheet for the partnership of Maddy, Nelson and Olsen on December 31, 2014 is shown below. Partners Maddy, Nelson and Olsen allocate profit and loss in their respective ratios of 9:6:10.
Assets
Cash$ 50,000
Marketable securities120,000
Inventory75,000
Land80,000
Building-net400,000
Total assets$725,000
Equities
Maddy, capital$425,000
Nelson, capital225,000
Olsen, capital75,000
Total equities$725,000
The partners agree to admit Poosh for a one-tenth interest. The fair market value for partnership land is $180,000, and the fair market value of the inventory is $150,000.
Required:
1.Record the entry to revalue the partnership assets prior to the admission of Poosh.
2.Calculate how much Poosh will have to invest to acquire a 10% interest.
3.Assume the partnership assets are not revalued. If Poosh paid $200,000 to the partnership in exchange for a 10% interest, what is the bonus that is allocated to each partner's capital account?
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