Question

A)Mary is to invest 160000 for one-fourth capital.

b) mary is to invest 160000 for 40% capital interest.

Exercise 15-9 Beth, Steph, and Linda have been operating a small gift shop for several years. After an extensive review of their past operating performance, the partners concluded that the business needed to expand in order to provide an adequate return to the partners. The following balance sheet is for the partnership prior to the admission of a new partner, Mary. Cash Other Assets Liabilities Beth, Capital (40%) Steph, Capital (40%) Linda, Capital (20%) $146,000 703,000 $849,000 $237,000 282,000 198,000 132,000 $849,000 Figures shown parenthetically reflect agreed profit-and-loss sharing percentages. Prepare the necessary journal entries to record the admission of Mary in each of the following independent situations. Some situations may be recorded in more than one way. (a) Your answer is correct. Mary is to invest sufficient cash to receive a one-sixth capital interest. The parties agree that the admission is to be recorded without recognizing goodwill or bonus. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit cash 122400|T Mary, Capital 122400 SHOW LIST OF ACCOUNTS

Answer 1

Since method is not specified, i have provided solution using bonus method

A)

Bonus Method
Beth	$       282,000
Steph	$       198,000
Linda	$       132,000
Mary Investment	$       160,000
Total Invested capital	$       772,000
Marys Interest (1/4th)	$       193,000
Account Titles	Debit	Credit
Cash	$       160,000
Beth, Capital	$          13,200		=33000*40%
Steph, Captial	$          13,200		=33000*40%
Linda, Capital	$            6,600		=33000*20%
Mary, Capital		$         193,000

(B)

Bonus Method
Beth	$       282,000
Steph	$       198,000
Linda	$       132,000
Mary Investment	$       160,000
Total Invested capital	$       772,000
Marys Interest (40%)	$       308,800
Account Titles	Debit	Credit
Cash	$       160,000
Beth, Capital	$          59,520		=(308800-160000)*40%
Steph, Captial	$          59,520		=(308800-160000)*40%
Linda, Capital	$          29,760		=(308800-160000)*20%
Mary, Capital		$         308,800