please help me to solve this problem.
THANK YOU AND MAY GOD BLESS YOU ALWAYS.
L. Carson agrees to pay $10,000 each to to C. Ames and D. Barker for 1/3 of their interest in the Ames-Barker partnership. At the time of the admission of Carson, each partner has a $30,000 capital balance. Both partners therefore give up $10,000 of their capital equity. (case 1)
Assume that instead of purchasing an interest, Carson invests $30,000 in cash in the Ames-Barker partnership for a 1/3 capital interest. (case 2)
Requirements :
1.provide Journal Entry in Case 1 &the effects of this transaction on the partnership accounts (use t-account)
2.Provide Journal Entry in Case 2 &the effects of this transaction on the partnership accounts (use t-account)
3.Total Capital for
a.Case 1
b. Case 2
To solve this problem, we need to understand the transactions involved and the effects they have on the partnership accounts. Let's break it down step by step:
Case 1: L. Carson agrees to pay $10,000 each to C. Ames and D. Barker for 1/3 of their interest in the Ames-Barker partnership.
1. Journal Entry in Case 1:
- Debit: L. Carson Drawings (for the amount paid) - $10,000
- Credit: C. Ames Capital (for the amount received) - $10,000
- Credit: D. Barker Capital (for the amount received) - $10,000
2. Effects of this transaction on the partnership accounts (using t-accounts):
- C. Ames Capital: Decrease by $10,000
- D. Barker Capital: Decrease by $10,000
- L. Carson Drawings: Increase by $10,000
- Cash (you didn't mention where the payment came from, assuming it's from cash): Decrease by $10,000
3. Total Capital for Case 1:
The total capital after the transaction will be $30,000 - $10,000 = $20,000.
Case 2: Instead of purchasing an interest, Carson invests $30,000 in cash in the Ames-Barker partnership for a 1/3 capital interest.
1. Journal Entry in Case 2:
- Debit: Cash (for the amount invested) - $30,000
- Credit: L. Carson Capital (for the capital invested) - $30,000
2. Effects of this transaction on the partnership accounts (using t-accounts):
- Cash: Decrease by $30,000
- L. Carson Capital: Increase by $30,000
3. Total Capital for Case 2:
The total capital after the transaction will be $30,000.
Please note that the above answers assume that there are no additional transactions or adjustments made in the partnership accounts. It is always good practice to verify the balances of each account and ensure they are accurate by considering all relevant transactions.