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Admission of a partner by the purchase of an interest Case 1 On 31 December 2011 Ringo and George, who share profits in the ratio 2:3, decide to admit Paul to the partnership with effect from 01 January 2012. On 31 December 2011 the balance on the capital account of Ringo amounted to N$ 21 000 and on the capital account of George to N$ 30 000. Paul is admitted on condition that he purchases one half of George's interest (capital and profit sharing) for a cash sum of N$ 25 000, which he pays directly to George and not to the partnership. You are required to: a) Show the journal entries for the acquisition of one half of Georges' interest by Paul. b) Calculate the new profit sharing ratio. c) Show the equity section of the statement of financial position after Paul was admitted. Admission of a partner by the purchase of an interest Case 2 Assume the same circumstances as in case 1, but Paul pays N$ 25 000 for one-third of Ringo's interest plus one third of George's interest. (Stated differently, Paul purchase a third interest in the partnership directly from Ringo and George). Paul again makes no contribution to the assets of the partnership. You are required to: a) Show the journal entries for the acquisition of one third of George and Ringo's interest by Paul. b) Calculate the new profit sharing ratio. c) Show the equity section of the statement of financial position after Paul was admitted. Self-assessment question On 31 December 2011 David, Gary and Sam, who share profits in the ratio 5:3:2, decide to admit Sylvia to the partnership with effect from 01 January 2012. On 31 December 2011 the balance on the capital account of David amounted to N$ 100 000, Gary N$ 175 000 and Sam's capital account amounted to N$ 250 000. Sylvia is admitted on condition that she purchases one half of Gary's interest and one fifth of Sam's interest (capital and profit sharing) for a cash sum of N$ 225 000, which he pays directly to Gary and Sam and not to the partnership. You are required to: d) Show the journal entries for the acquisition of Gary and Sam's interest by Sylvia. e) Calculate the new profit sharing ratio. f) Show the equity section of the statement of financial position after Sylvia was admitted. Admission of a partner by the purchase of an interest Case 1 On 31 December 2011 Ringo and George, who share profits in the ratio 2:3, decide to admit Paul to the partnership with effect from 01 January 2012. On 31 December 2011 the balance on the capital account of Ringo amounted to N$ 21 000 and on the capital account of George to N$ 30 000. Paul is admitted on condition that he purchases one half of George's interest (capital and profit sharing) for a cash sum of N$ 25 000, which he pays directly to George and not to the partnership. You are required to: a) Show the journal entries for the acquisition of one half of Georges' interest by Paul. b) Calculate the new profit sharing ratio. c) Show the equity section of the statement of financial position after Paul was admitted. Admission of a partner by the purchase of an interest Case 2 Assume the same circumstances as in case 1, but Paul pays N$ 25 000 for one-third of Ringo's interest plus one third of George's interest. (Stated differently, Paul purchase a third interest in the partnership directly from Ringo and George). Paul again makes no contribution to the assets of the partnership. You are required to: a) Show the journal entries for the acquisition of one third of George and Ringo's interest by Paul. b) Calculate the new profit sharing ratio. c) Show the equity section of the statement of financial position after Paul was admitted. Self-assessment question On 31 December 2011 David, Gary and Sam, who share profits in the ratio 5:3:2, decide to admit Sylvia to the partnership with effect from 01 January 2012. On 31 December 2011 the balance on the capital account of David amounted to N$ 100 000, Gary N$ 175 000 and Sam's capital account amounted to N$ 250 000. Sylvia is admitted on condition that she purchases one half of Gary's interest and one fifth of Sam's interest (capital and profit sharing) for a cash sum of N$ 225 000, which he pays directly to Gary and Sam and not to the partnership. You are required to: d) Show the journal entries for the acquisition of Gary and Sam's interest by Sylvia. e) Calculate the new profit sharing ratio. f) Show the equity section of the statement of financial position after Sylvia was admitted