Question

Craig Roberts purchased one-half of Ennis Leighton’s interest in the Vale and Leighton partnership for $36,300. Prior to the investment, land was revalued to a market value of $163,080 from a book value of $85,810. Tony Vale and Ennis Leighton share net income equally. Leighton had a capital balance of $29,300 prior to these transactions.Required:A. On December 31, provide the journal entry for the revaluation of land.B. On December 31, provide the journal entry to admit Roberts.

Answer 1

Answer:

A. On December 31, provide the journal entry for the revaluation of land:

Land: Debit $77,270

Tony Vale's capital: Credit $38,635

Ennis Leighton's capital: Credit $38,635

B. On December 31, provide the journal entry to admit Roberts.

Craig Roberts's capital:  Credit $36,300

Tony Vale's capital: Debit $18,150

Ennis Leighton's capital: Debit $18,150

Explanation:

A. Increase Land value = a market value of $163,080 - book value of $85,810 = $77,270, which then allocate to Tony and Ennis equally, $38,635 = $77,270/ 2

B. Increase Craig Roberts's capital in the Vale and Leighton partnership for $36,300, which then decrease interest of 2 current shareholder equally $18,150 per.