Conley and Liu Allow Lepley to Purchase a 25% Interest

question 13

Essay

Conley and Liu allow Lepley to purchase a 25% interest in their partnership for $50,000 cash. Conley and Liu both have capital balances of $55,000 each, and have agreed to share income and loss equally. Prepare the journal entry to record the admission of Lepley to the partnership.

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Definitions:

Net Advantage

The total benefits received minus the costs incurred from an investment or business decision.

Resale Value

The estimated market value of an asset at the future date when it is likely to be sold, often used in reference to vehicles and property.

Present Value

The current value of a future sum of money or stream of cash flows, given a specified rate of return.

Tax Shields

The reduction in income taxes that results from taking allowable deductions such as depreciation, mortgage interest, and other allowances.