Question
The Distance Plus partnership has the following capital balances at the beginning of the current year: Tiger (50% of profits and losses) $ 75,000 Phil
The Distance Plus partnership has the following capital balances at the beginning of the current year:
| Tiger (50% of profits and losses) | $ | 75,000 |
| Phil (20%) | 45,000 | |
| Ernie (30%) | 60,000 | |
Each of the following questions should be viewed independently.
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If Sergio invests $60,000 in cash in the business for a 20 percent interest, what journal entry is recorded? Assume that the bonus method is used.
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If Sergio invests $40,000 in cash in the business for a 20 percent interest, what journal entry is recorded? Assume that the bonus method is used.
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If Sergio invests $50,000 in cash in the business for a 20 percent interest, what journal entry is recorded? Assume that the goodwill method is used.
Note: there is one JE for A to record the admission of new partner under bonus method, one JE for B, to record the admission of new partner under bonus method, and 2 JE's for C, the first to record the entry for goodwill allocation, during the admission of a new partner and the second to record the investment made by the new partner in the business.
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