Problem 1: Phil Phoenix and Tim Tucson are partners in electrical repair business. Their respective capital balances are $90,000 and $50,000. and they share profits and losses equally. Because the partners are confronted with personal and financial problems, they decided to admit a new partner to the partnership. After an extensive interviewing process they elect to admit Don Dallas into the partnership. Required: Prepare the journal entry to record the admission of Don Dallas into the partnership under each of the following conditions:
A) Don acquires one-fourth of Phil's capital interest by paying $30,000 directly to him. Answer using Bonus and Good Will Method.
B) Don invests $40,000 for a one-fifth interest in partnership capital. Payment is made to the partnership. Answer using Bonus and Good Will Method.
C) Don acquires one-fifth of each of Phil's and Tim's capital interests. Phil receives $25,000 and Tim receives $15.000 directly from Don. Answer using Bonus and Good Will Method.
D) Don acquires a one-fifth capital interest for a $60,000 cash investment in the partnership. Total capital after the admission is to be $200,000. Answer using Bonus and Good Will Method.
Problem 2: Dave, Allen and Matt share profits and losses in the ratio of 50:30:20. Allen withdrew from the partnership December 31. 2014. Capital account balances are as follows:
Dave, Capital $80,000
Allen, Capital $80,000
Matt, Capital $62,000
Required: Prepare the journal entry or entries to record the withdrawal of Allen, given each of the following situations. Assume the bonus method is used to account for the withdrawal.
1. Allen receives $35,000 cash and a $75,000 note from the partnership for his interest.
2. The partnership gives Allen $35,000 cash and equipment with a book value and a fair value of $40,000 for his interest.
3. The partnership gives Allen $100,000 cash for his interest.