Instructions – Admitting new partner who contributes assets

After the tangible assets have been adjusted to current market prices, the capital accounts of Brad Paulson and Drew Webster have balances of $45,000 and $60,000, respectively. Austin Neel is to be admitted to the partnership, contributing $30,000 cash to the partnership, for which he is to receive an ownership equity of $35,000. All partners share equally in income. (A) On December 31, journalize the entry to record the admission of Neel, who is to receive a bonus of $5,000. Refer to the Chart of Accounts for exact wording of account titles. (B) What are the capital balances of each partner after the admission of the new partner? (C) Why are tangible assets adjusted to current market prices, prior to admitting a new partner?

A. On December 31, journalize the entry to record the admission of Neel, who is to receive a bonus of $5,000. Refer to the Chart of Accounts for exact wording of account titles.

Date                       Description                    Post Ref                   Debit             Credit

1

2

3

4

B. What are the capital balances of each partner after the admission of the new partner.

Brad Paulson      $

Drew Webster     $

Austin Neel         $