E12-19 Accounting for the admission of a new partner

Learning Objective 4

2.c. Nedia, Capital $3,750 CR

Hadley Harris is admitted to the partnership of Reamey & Nedia. Prior to her admission, the partnership books show Gabby Reamey's capital balance at $100,000 and Carlos Nedia's at $50,000. Assume Reamey and Nedia share profits and losses equally.

Requirements

1.Compute each partner's equity on the books of the new partnership under the following plans:

a.Harris pays $85,000 for Nedia's equity. Harris pays Nedia directly.

b.Harris contributes $50,000 to acquire a 1/4 interest in the partnership.

c.Harris contributes $60,000 to acquire a 1/4 interest in the partnership.

2.Journalize the entries for admitting the new partner under plans a, b, and c.