Journal entries recording employee admission
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William and Frank are partners whose capital balances are $400,000 and $300,000 and who share profits 3:2. Due to a shortage of cash, William and Frank agree to admit Sammy to the firm.
Required: Prepare the journal entries required to record Sammy's admission under each of the following assumptions:
- Sammy invests $200,000 for a 1/4 interest. The total firm capital is to be $900,000.
- Sammy invests $300,000 for a 1/4 interest. Goodwill is to be recorded.
- Sammy purchases a 1/4 interest in the firm, with 1/4 of the capital of each old partner transferred to the account of the new partner. Sammy pays the partners cash of $250,000, which they divide between themselves.
- The principal types of partnerships are general partnerships, limited partnerships, and joint ventures. Describe the characteristics of each type of partnership.
- There are two methods of recording changes in the membership of a partnership - the bonus method and the goodwill method. Describe these two methods of recording changes in partnership membership.
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William and Frank are partners whose capital balances are $400,000 and $300,000 and who share profits 3:2. Due to a shortage of cash, William and Frank agree to admit Sammy to the firm.
Required: Prepare the journal entries required to record Sammy's admission under each of the following assumptions:
- Sammy invests $200,000 for a 1/4 interest. The total firm capital is to be $900,000.
- Sammy invests $300,000 for a 1/4 interest. Goodwill is to be recorded.
- Sammy purchases a 1/4 interest in the firm, with 1/4 of the capital of each old partner transferred to the account of the new partner. Sammy pays the partners cash of $250,000, which they divide between themselves.
(a) Cash 200,000
William, Capital ($25,000 × ...
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