New Partner Admission: Purchase of Existing Interest

The capital balances for the partnership of Ajeet, Rahul, and Suresh are as follows:

CapitalAjeet	$400,000
CapitalRahu	350,000
CapitalSuresh	500,000

The partnership profit-sharing ratio is 3:2:5. A new partner, Harish, enters the partnership by purchasing existing interests in the partnership.

Required

Prepare the journal entry to record Harishs admission to the partnership, and compute the new capital balances, in each of the following cases.

a. Harish pays Ajeet $450,000 for his entire interest in the partnership. There is no revaluation of partnership assets.

Journal entry to record Harishs admission to the partnership:

Description	Debit	Credit
AnswerCapital-AjeetCapital-HarishCapital-RahulCapital-SureshCash	Answer	Answer
AnswerCapital-AjeetCapital-HarishCapital-RahulCapital-SureshCash	Answer	Answer

New capital balances:
Ajeet	$Answer
Harish	$Answer
Rahul	$Answer
Suresh	$Answer

b. Harish pays the three partners a total of $420,000 for 20 percent of each of the partners interests. There is no revaluation of partnership assets.

Journal entry to record Harishs admission to the partnership:

Description	Debit	Credit
Capital-Ajeet	Answer	Answer
Capital-Rahul	Answer	Answer
AnswerCapital-AjeetCapital-HarishCapital-RahulCapital-SureshCash	Answer	Answer
AnswerCapital-AjeetCapital-HarishCapital-RahulCapital-SureshCash	Answer	Answer

New capital balances:
Ajeet	$Answer
Harish	$Answer
Rahul	$Answer
Suresh	$Answer

c. Repeat part b, assuming revaluation of partnership assets by recording goodwill.

Journal entry to record Harishs admission to the partnership:

Description	Debit	Credit
Capital-Ajeet	Answer	Answer
Capital-Rahul	Answer	Answer
AnswerCapital-AjeetCapital-HarishCapital-RahulCapital-SureshCash	Answer	Answer
AnswerCapital-AjeetCapital-HarishCapital-RahulCapital-SureshCash	Answer	Answer

New capital balances:
Ajeet	$Answer
Harish	$Answer
Rahul	$Answer
Suresh	$Answer