Is anyone can help me to solve this problem beloww. thank you very much.
PROBLEM 1:
On Jan 1, 2011, the Rhiri, Brit & Keisha partnership is formed. Rhiri and Brit contribute cash of $30,000 and $20,000 respectively, while Keisha contributes assets with the following fair values:
Inventory $ 5,000
Land 22,000
Buildings 23,000
TOTAL CONTRIBUTIONS $ 50,000
The partners agree on a profit and loss sharing ratio of 3:2:5. During the first year, net income is $70,000 and the partners’ drawings are Rhirhi — $12,000, Brit —$15,000, and Keisha — $30,000.
Requirements :
1.Record the Initial investment made by each partners during Jan 1. (10pts)
2.Entries to record withdrawals made by partners. (5pts)
Sure! I can help you with that. Let's solve each requirement step-by-step:
Requirement 1: Record the Initial investment made by each partner on Jan 1.
To record the initial investments made by each partner, we need to create separate capital accounts for Rhiri, Brit, and Keisha. Here are the entries for the initial investments:
Rhiri's investment:
Debit: Cash $30,000
Credit: Rhiri's Capital $30,000
Brit's investment:
Debit: Cash $20,000
Credit: Brit's Capital $20,000
Keisha's investment (registering assets at fair values):
Debit: Inventory $5,000
Debit: Land $22,000
Debit: Buildings $23,000
Credit: Keisha's Capital $50,000
Please note that the total debits and credits both amount to $50,000, which represents the total investment made by all partners.
Requirement 2: Entries to record withdrawals made by partners.
To record the withdrawals made by each partner, we need to decrease their respective capital accounts. Here are the entries for the withdrawals:
Rhiri's withdrawal:
Debit: Rhiri's Capital $12,000
Credit: Cash $12,000
Brit's withdrawal:
Debit: Brit's Capital $15,000
Credit: Cash $15,000
Keisha's withdrawal:
Debit: Keisha's Capital $30,000
Credit: Cash $30,000
These entries will reduce the respective partner's capital accounts and decrease the amount of cash in the business.
Sure! I can help you solve the problem and explain how to solve each step.
1. Recording the initial investments made by each partner:
To record the initial investments made by each partner, we need to create a journal entry. The cash contributions made by Rhiri and Brit will be recorded as credits to their respective capital accounts. Keisha's contributions, which are non-cash assets, will be recorded based on their fair value.
Here's how the journal entry will look like:
Date: Jan 1, 2011
Rhiri's Capital Account Credit $30,000
Brit's Capital Account Credit $20,000
Keisha's Inventory Debit $5,000
Keisha's Land Debit $22,000
Keisha's Buildings Debit $23,000
Explanation:
- Rhiri's capital account is credited with $30,000 to record her cash contribution.
- Brit's capital account is credited with $20,000 to record his cash contribution.
- Keisha's inventory, land, and buildings accounts are debited to record the fair value of her non-cash contributions.
2. Entries to record withdrawals made by partners:
To record the partners' withdrawals, we will need to create journal entries that reduce their capital account balances. The amounts withdrawn will be debited to the respective partner's capital account.
Here's how the journal entries will look like for each partner's withdrawal:
a) Rhiri's withdrawal:
Date: (Withdrawal Date)
Rhiri's Capital Account Debit $12,000
Cash Credit $12,000
Explanation:
- Rhiri's capital account is debited with $12,000 to reduce her capital balance.
- The cash account is credited to show the payment made to Rhiri.
b) Brit's withdrawal:
Date: (Withdrawal Date)
Brit's Capital Account Debit $15,000
Cash Credit $15,000
Explanation:
- Brit's capital account is debited with $15,000 to reduce his capital balance.
- The cash account is credited to show the payment made to Brit.
c) Keisha's withdrawal:
Date: (Withdrawal Date)
Keisha's Capital Account Debit $30,000
Cash Credit $30,000
Explanation:
- Keisha's capital account is debited with $30,000 to reduce her capital balance.
- The cash account is credited to show the payment made to Keisha.
That's it! You have now recorded the initial investments and withdrawals made by each partner. Let me know if there's anything else I can assist you with.