Question
Dan and Ellie share partnership profits and losses at 70% and 30%, respectively. The partners agree to admit Fran into the partnership for a 50%
Dan and Ellie share partnership profits and losses at 70% and 30%, respectively. The partners agree to admit Fran into the partnership for a 50% interest in capital and earnings. Capital accounts immediately before the admission of Fran are: Dan (70%) $ 800,000 Ellie (30%) 400,000 Total $ 1,200,000 Part 1: Prepare the journal entry(s) for the admission of Fran to the partnership, assuming Fran invested $800,000 for the ownership interest and that this is a fair price for that share of the partnership to be acquired. Fran paid the money directly to Dan and to Ellie for 50% of each of their respective capital interests. The partnership records goodwill. Part 2: Prepare the journal entry(s) for the admission of Fran to the partnership, assuming Fran invested $1,000,000 for the ownership interest. Fran paid the money to the partnership for a 50% interest in capital and earnings. Assume the valuation is based on the capital of the current partnership, which is fairly valued. The partnership records goodwill. Part 3: Prepare the journal entry(s) for the admission of Fran to the partnership, assuming Fran invested $1,400,000 for the ownership interest and that this is a fair price for that share of the partnership to be acquired. Fran paid the money to the partnership for a 50% interest in capital and earnings. The partnership records goodwill.
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