D is corrent. If goodwill is not recorded upon admission of a new partner, the bonus method is used to record the transaction. Poe receives credit for a 1/5 interest in the total partnership equity of $77,000 ($40,000 + $20,000 + $17,000). Therefore, his capital account is credited for $15,400 (1/5 x $77,000). The difference between his cash contribution ($17,000) and his capital credit ($15,400) is the bonus to the old partners and is credited to their capital accounts, as indicated in the entry below. | Cash | 17,000 | | | Poe, capital | | 15,400 | | Reed capital (1,600 × 2/3) | | 1,067 | | Quinn capital (1,600 × 1/3) | | 533 |
A is incorrect. If goodwill is not recorded upon admission of a new partner, the bonus method is used to record the transaction. Poe receives credit for a 1/5 interest in the total partnership equity of $77,000 ($40,000 + $20,000 + $17,000). Therefore, his capital account is credited for $15,400 (1/5 x $77,000). The difference between his cash contribution ($17,000) and his capital credit ($15,400) is the bonus to the old partners and is credited to their capital accounts, as indicated in the entry below. | Cash | 17,000 | | | Poe, capital | | 15,400 | | Reed capital (1,600 × 2/3) | | 1,067 | | Quinn capital (1,600 × 1/3) | | 533 |
B is incorrect. If goodwill is not recorded upon admission of a new partner, the bonus method is used to record the transaction. Poe receives credit for a 1/5 interest in the total partnership equity of $77,000 ($40,000 + $20,000 + $17,000). Therefore, his capital account is credited for $15,400 (1/5 x $77,000). The difference between his cash contribution ($17,000) and his capital credit ($15,400) is the bonus to the old partners and is credited to their capital accounts, as indicated in the entry below. | Cash | 17,000 | | | Poe, capital | | 15,400 | | Reed capital (1,600 × 2/3) | | 1,067 | | Quinn capital (1,600 × 1/3) | | 533 |
C is incorrect. If goodwill is not recorded upon admission of a new partner, the bonus method is used to record the transaction. Poe receives credit for a 1/5 interest in the total partnership equity of $77,000 ($40,000 + $20,000 + $17,000). Therefore, his capital account is credited for $15,400 (1/5 x $77,000). The difference between his cash contribution ($17,000) and his capital credit ($15,400) is the bonus to the old partners and is credited to their capital accounts, as indicated in the entry below. | Cash | 17,000 | | | Poe, capital | | 15,400 | | Reed capital (1,600 × 2/3) | | 1,067 | | Quinn capital (1,600 × 1/3) | | 533 |
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