Admitting New Partner Who Contributes Assets

After the tangible assets have been adjusted to current market prices, the capital accounts of Grayson Jackson and Harry Barge have balances of $64,900 and $86,500, respectively. Lewan Gorman is to be admitted to the partnership, contributing $43,300 cash to the partnership, for which he is to receive an ownership equity of $50,500. All partners share equally in income.

a. Journalize the entry to record the admission of Gorman, who is to receive a bonus of $7,200. If an amount box does not require an entry, leave it blank.

		fill in the blank 1201ed03802d04e_2	fill in the blank 1201ed03802d04e_3
		fill in the blank 1201ed03802d04e_5	fill in the blank 1201ed03802d04e_6
		fill in the blank 1201ed03802d04e_8	fill in the blank 1201ed03802d04e_9
		fill in the blank 1201ed03802d04e_11	fill in the blank 1201ed03802d04e_12

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

Partner	Balance
Grayson Jackson	$fill in the blank ec119bfd4fc9078_1
Harry Barge	$fill in the blank ec119bfd4fc9078_2
Lewan Gorman	$fill in the blank ec119bfd4fc9078_3

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.