I was wondering how should I record the journal entry admission of the new partner (Tom) to the partnership?
Allocation of Income of two partner is as follow before having the Third partner:
Admission of New Partner
On January 1, 2018 John and Jane decide to admit a new partner, Tom, for a 1/6 interest in the firm for $175,000. The bonus method is used to record the admission of the new partner. After admitting the new partner, the partnership agreement is amended as follows:
Each partner receives 10% interest on his beginning capital balance. Each partner receives an annual salary of $20,000. The residual profit of loss is divided in a ratio of 30% to John, 50% to Jane, and 20% to Tom.
Record the journal entry to admission of Tom to the partnership.
Journal entry at admission of Tom Debit Cash (175000 +... View the full answer
- Tom's capital at the time of admission will be 175000 only. And at the time of John and Jane they will receive 10% of their opening capital + 20000 of annual salary
- May 05, 2018 at 3:04pm