Each of the following questions should be viewed independently. The Distance Plus partnership has the following...
Each of the following questions should be viewed independently.
The Distance Plus partnership has the following capital balances at the beginning of the current year:
Tiger (50% of profits and losses) $ 160,000 Phil (40%) 130,000 Ernie (10%) 145,000
Each of the following questions should be viewed independently.
If Sergio invests $190,000 in cash in the business for a 25 percent interest, what journal entry is recorded? Assume that the bonus method is used.
If Sergio invests $140,000 in cash in the business for a 25 percent interest, what journal entry is recorded? Assume that the bonus method is used.
If Sergio invests $150,000 in cash in the business for a 25 percent interest, what journal entry is recorded? Assume that the goodwill method is used.
Homework Answers
| Sr No | Account Titles & Explanation | Debit $ | Credit $ |
| 1 | Cash | 190000 | |
| Tiger's capital [(190000-156250)*50%] | 16875 | ||
| Phil's capital [(190000-156250)*40%] | 13500 | ||
| Ernie's capital [(190000-156250)*10%] | 3375 | ||
| Sergio's capital [(160000+130000+1450000+190000)*25%] | 156250 | ||
| (Admission of Sergio) | |||
| 2 | Cash | 140000 | |
| Tiger's capital (143750-140000)*50% | 1875 | ||
| Phil's capital (143750-140000)*40% | 1500 | ||
| Ernie's capital (143750-140000)*10% | 375 | ||
| Sergio's capital [(160000+130000+1450000+140000)*25%] |
143750 |
||
| (Admission of Sergio) | |||
| 3 (a) | Goodwill [(150000/25%)-(160000+130000+1450000+150000)] | 25000 | |
| Tiger's capital (25000*50%) | 12500 | ||
| Phil's capital (25000*40%) | 10000 | ||
| Ernie's capital(25000*10%) | 2500 | ||
| (Distribution of Goodwill) | |||
| (b) | Cash | 150000 | |
| Sergio's capital | 150000 | ||
| (Admission of Sergio) | |||
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