Exercise 2A - Admitting a New Partner The AlphabetSoup Partnership has three existing partners with capital accounts and profit splits as follows: Partner Capital Balance Profit Interest $1,000,000 10% B 6,000,000 60% 3,000,000 30% $10.000.000 100% If AlphabetSoup admits a new partner, under each of the following scenarios determine how the is the entry is booked by entering the proper dollar amount in each gray-shaded cell. When correct, the cells will change color to a light green. Scenario 1: New Partner D contributes $10,000,000 for a 50% capital share of the firm. $10,000,000 / 50% implies a FMV of $20,000,000 Total new capital = $10,000,000 + $10,000,000 = $20,000,000 Account Debit Credit Assets (Contributed by D) Capital - D Scenario 2: New Partner contributes $14,000,000 for a 50% capital share of the firm. The firm uses the bonus method of accounting for new partners and the bonus is applied to the existing partners. $14,000,000 / 50% implies a FMV of $28,000,000 Total new capital = $10,000,000 + $ 14,000,000 = $24,000,000 New Partner Capital Balance = (BV Original + New Contribution) x New Partner % New Partner Capital Balance = ($10,000,000+ $14,000,000) x 50% New Partner Capital Balance = $24,000,000 x 50% = $12,000,000 Debit Credit Account Assets Contributed by D Capital - A Capital - B Capital - Capital-D Scenario 3: New Partner D contributes $14,000,000 for a 50% capital share of the firm. The firm uses the goodwill method, and any excess over FMV is attributable to existing goodwill. $14,000,000 / 50% implies a FMV of $28,000,000 Total new contributed capital = $14,000,000+ $10,000,000 = $24,000,000 $4,000,000 difference - Goodwill Total New Capital = $2,000,000 + $5,000,000 + $7,000,000 = $14,000,000 Account D C Assets (contributed by D Goodwill Capital - A Capital - B Capital - C Capital-D Scenario 4: New Partner D contributes $6,000,000 for 50% share of the firm. The firm uses the bonus method, and any bonus is attributable to the new partner. Total new capital = $10,000,000 + $6,000,000 = $16,000,000 New Partner Capital Balance = (BV Original + New Contribution) x New Partner % New Partner Capital Balance ($10,000,000 + $6,000,000) x 50% New Partner Capital Balance = $16,000,000 x 50% = $8,000,000 D Account Assets (contributed by D) Capital - A Capital - Capital - Capital -D