Admitting New Partner With Bonus

L. Bowers and V. Lipscomb are partners in Elegant Event Consultants. Bowers and Lipscomb share income equally. M. Ortiz will be admitted to the partnership. Prior to the admission, equipment was revalued downward by $18,000. The capital balances of each partner are $100,000 and $137,000, respectively, prior to the revaluation.

a. Provide the journal entry for the asset revaluation. For a compound transaction, if an amount box does not require an entry, leave it blank.

	L. Bowers, Capital
	V. Lipscomb, Capital
	Equipment

Feedback

a. Adjust the equipment and adjust each partner's equity account in their income-sharing ratio.

b. Provide the journal entry for Ortizs admission under the following independent situations:

1. Ortiz purchased a 20% interest for $48,000. For a compound transaction, if an amount box does not require an entry, leave it blank.

	Cash
	L. Bowers, Capital
	V. Lipscomb, Capital
	M. Ortiz, Capital

Feedback

b.1. Determine the total capital, including the new contribution. Calculate the new partner's share of the total capital. If the new partner's contribution exceeds his share of the capital, the bonus goes to the existing partners. If the new partner's share of the capital exceeds the contribution, the bonus goes to the new partner.

2. Ortiz purchased a 30% interest for $120,000. For a compound transaction, if an amount box does not require an entry, leave it blank.

	M. Ortiz, Capital
	L. Bowers, Capital
	V. Lipscomb, Capital
	Equipment