After the tangible assets have been adjusted to current market prices, the capital accounts of Brad Paulson and Drew Webster have balances of $48,250 and $55,900, respectively Austin Neel is to be admitted to the partnership, contributing $32,770 cash to the partnership, for which he is to receive an ownership equity of $37,520 All partners share equally in income Required A On December 31, journalize the entry to record the admission of Neel, who is to receive a bonus of $4,750 Refer to the Chart of Accounts for exact wording of account titles B What are the capital balances of each partner after the admission of the new partner C Why are tangible assets adjusted to current market prices, prior to admitting a new partner CHART OF ACCOUNTS Paulson, Webster, and Neel General Ledger ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 113 Allowance for Doubtful Accounts 114 Interest Receivable 115 Notes Receivable 116 Inventory 117 Office Supplies 118 Store Supplies 119 Prepaid Insurance 120 Land 123 Equipment 124 Accumulated Depreciation Equipment 129 Asset Revaluations 133 Patent LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Brad Paulson, Capital 311 Brad Paulson, Drawing 312 Drew Webster, Capital 313 Drew Webster, Drawing 314 Austin Neel, Capital 315 Austin Neel, Drawing REVENUE 410 Sales 610 Interest Revenue A On December 31, journalize the entry to record the admission of Neel, who is to receive a bonus of $4,750 Refer to the Chart of Accounts for exact wording of account titles PAGE 10 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST REF DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3 4 B What are the capital balances of each partner after the admission of the new partner Partner Balance Brad Paulson Drew Webster Austin Neel 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

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After the tangible assets have been adjusted to current market prices, the capital accounts of Brad Paulson and Drew Webster have balances of $48,250 and

After the tangible assets have been adjusted to current market prices, the capital accounts of Brad Paulson and Drew Webster have balances of $48,250 and $55,900, respectively. Austin Neel is to be admitted to the partnership, contributing $32,770 cash to the partnership, for which he is to receive an ownership equity of $37,520. All partners share equally in income.

	Required:
A.	On December 31, journalize the entry to record the admission of Neel, who is to receive a bonus of $4,750. Refer to the Chart of Accounts for exact wording of account titles.
B.	What are the capital balances of each partner after the admission of the new partner?
C.	Why are tangible assets adjusted to current market prices, prior to admitting a new partner?

CHART OF ACCOUNTS

Paulson, Webster, and Neel

General Ledger

	ASSETS
110	Cash
111	Petty Cash
112	Accounts Receivable
113	Allowance for Doubtful Accounts
114	Interest Receivable
115	Notes Receivable
116	Inventory
117	Office Supplies
118	Store Supplies
119	Prepaid Insurance
120	Land
123	Equipment
124	Accumulated Depreciation-Equipment
129	Asset Revaluations
133	Patent

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Brad Paulson, Capital
311	Brad Paulson, Drawing
312	Drew Webster, Capital
313	Drew Webster, Drawing
314	Austin Neel, Capital
315	Austin Neel, Drawing

	REVENUE
410	Sales
610	Interest Revenue

A. On December 31, journalize the entry to record the admission of Neel, who is to receive a bonus of $4,750. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

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

Partner	Balance
Brad Paulson
Drew Webster
Austin Neel

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.