Joey and Rachel Are Partners Whose Capital Balances Are $400,000

question 21

Essay

Joey and Rachel are partners whose capital balances are $400,000 and $300,000 and who share profits 3:2. Due to a shortage of cash, Joey and Rachel agree to admit Ross to the firm.
Required:
Prepare the journal entries required to record Ross's admission under each of the following assumptions:
(a) Ross invests $200,000 for a 1/4 interest. The total firm capital is to be $900,000.
(b) Ross invests $300,000 for a 1/4 interest. Goodwill is to be recorded.
(c) Ross invests $150,000 for a 1/5 interest. Goodwill is to be recorded.
(d) Ross 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. Ross pays the partners cash of $250,000, which they divide between themselves.

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Definitions:

Modes of Thinking

The various ways in which individuals process information, make decisions, and solve problems.

Modes of Acting

Different styles or methods through which individuals can express themselves or perform tasks.

Modes of Interacting

Different ways people communicate and engage with each other, often determined by context, culture, or personal preference.

Motivation

The process that initiates, guides, and maintains goal-oriented behaviors.