Admitting new partner who contributes assets
After the tangible assets have been adjusted to current market prices, the capital accounts of Brandon Newman and Latrell Osbourne have balances of $75,000 and $125,000, respectively. Juan Rivas is to be admitted to the partnership, contributing $50,000 cash to the partnership, for which he is to receive an ownership equity of $65,000. All partners share equally in income.
a. Journalize the entry to record the admission of Rivas, who is to receive a bonus of $15,000.
b. What are the capital balances of each partner after the admission of the new partner?
c. Why are tangible assets adjusted to current market prices, prior to admitting a new partner?