Recording new partner investment—Revaluation case
Bow and Mon are partners in a retail business and divide profits 60 percent to Bow and 40 percent to Mon. Their capital balances at December 31, 2011, are as follows:
|
Bow capital |
$90,000 |
|
Mon capital |
90,000 |
|
Total capital |
$180,000 |
Partnership assets and liabilities have book values equal to fair values. The partners agree to admit Joh into the partnership. Joh purchases a one third interest in partnership capital and profits directly from Bow and Mon (one third of each of their capital accounts) for $75,000.
REQUIRED: Prepare journal entries for the admission of Joh into the partnership, assuming that partnership assets are revalued.