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5 November, 04:59

Wallace and Simpson formed a partnership with Wallace contributing $92,000 and Simpson contributing $72,000. Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. Wallace sold one-half of his partnership interest to Prince for $63,000 when his capital balance was $84,000. The partnership would record the admission of Prince into the partnership as:

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  1. 5 November, 05:09
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    Given that,

    Wallace contributing = $92,000

    Simpson contributing = $72,000

    Wallace capital balance = $84,000

    Wallace sold one-half of his partnership interest to Prince for $63,000,

    Now, 50% of the share is transferred to the prince:

    = 50% of Capital balance of Wallace (at that time)

    = 50% * $84,000

    = $42,000

    Therefore, the journal entry is as follows:

    Wallace capital A/c Dr. $42,000

    To Prince capital $42,000

    (To record the transfer of share)
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