Admitting New Partner Who Contributes Assets

After the tangible assets have been adjusted to current market prices, the capital accounts of Elayne Summers and Murv Newcomb have balances of $$55,000$ and $$83,000,$ respectively. Rose Clayton is to be admitted to the partnership, contributing $$37,000$ cash to the partnership, for which she is to receive an ownership equity of $$48,000.$ All partners share equally in income.

a$.$ Journalize the entry to record the admission of Rose Clayton, who is to receive a bonus of $$11,000.$ If an amount box does not require an entry, leave it blank.

b$.$ What are the capital balances of each partner after the admission of the new partner?

Partner

Balance

Elayne Summers

$

Murv Newcomb

$

Rose Clayton

$

a$.$ Journalize the entry to record the admission of Rose Clayton, who is to receive a bonus of $$11,000.$ If an amount box does not require an entry, leave it blank.

b$.$ What are the capital balances of each partner after the admission of the new partner?

Partner

Balance

Elayne Summers

$

Murv Newcomb

g

Rose Clayton

$

c$.$ Why are tangible assets adjusted to current market prices prior to admitting a new partner?

Tangible assets should be adjusted to current market prices so that the new partner any gains or losses from changes in market prices prior to being admitted. For example, if the market price of land doubled prior to admitting new partners, should realize the increase in the value of the land in their capital accounts prior to the new partners' admission. Otherwise, would share in the increase in the market value of the land.