Accounting for the admission of a new partner
Hayley Hollis is admitted to the partnership of Rose & Novak. Prior to her admission, the partnership books show Greta Rose’s capital balance at $170,000 and Chris Novak’s at $85,000. Assume Rose and Novak share profits and losses equally.
Requirements
1. Compute each partner’s equity on the books of the new partnership under the following plans:
a. Hollis pays $95,000 for Novak’s equity. Hollis pays Novak directly.
b. Hollis contributes $85,000 to acquire a 1/4 interest in the partnership.
c. Hollis contributes $105,000 to acquire a 1/4 interest in the partnership.
2. Journalize the entries for admitting the new partner under plans a, b, and c.
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