Principles of Financial Accounting · free preview
Admitting and Withdrawing a Partner
Admitting a new partner requires renegotiating capital, either by purchasing an existing interest at book value or by investing new assets, and a withdrawal is settled by paying the departing partner's capital balance, with bonuses between partners when the price differs from book value.
1. Admission by purchase of interest
Admission by purchase of interest
2. Admission by investment
Admission by investment
3. Withdrawal at book value
Withdrawal at book value
4. Withdrawal with bonus
Withdrawal with bonus
5. Purchase admission entry
Partner C buys half of Partner A's 100,000 dollar capital interest for 60,000 dollars paid to A personally. What does the partnership record?
6. Investment admission arithmetic
A firm has existing capital of 200,000 dollars. Partner C invests 80,000 dollars cash. Compute total partnership capital after admission, assuming no bonus or goodwill.
7. Withdrawal at book value
A partner with a 100,000 dollar capital balance withdraws and is paid exactly that amount in cash. Which entry applies?
8. Bonus to departing partner
A departing partner's capital balance is 100,000 dollars, but the partners agree to pay 120,000 dollars. How is the 20,000 dollar excess treated?
9. Purchase admission capital shift
Partner C buys a 50,000 dollar capital interest from Partner A for a private price. Compute the credit to C's capital in dollars, number only.
10. Withdrawal bonus source
A 20,000 dollar bonus to a withdrawing partner is funded by the ____ partners' capital accounts. One word.
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