In the jk partnership, jacob's capital is $140,000, and katy's is $40,000. they share income in a 3: 2 ratio, respectively. they decide to admit erin to the partnership. each of the following questions is independent of the others.
refer to the information provided above. erin invests $50,000 for a one-fifth interest in the total capital of $230,000. the journal entry to record erin's admission into the partnership would include
a. a debit to jacob, capital for $2,400.
b. a credit to erin, capital for $50,000.
c. a credit to katy, capital for $1,600.
d. a credit to cash for $50,000.

C. a credit to Katy, Capital for $1,600.

Explanation:

In the given instance, it is provided that Erin is admitted for 1/5th share, for which he brings $50,000

Now, for a total of $230,000 share

1/5 = $230,000 1/5 = $46,000

Since Erin brings $50,000, that means there is goodwill worth $50,000 - $46,000 = $4,000

Now, as Erin brings cash of $50,000, cash will be debited by same.

For recording goodwill, Both old partners account will be credited.

$4,000 3/5 = $2,400 for Jacob

$4,000 2/5 = $1,600 for Katy.

Therefore, as old partner's account have to be credited, correct entry is

Katy's Capital account for $1,600.

the correct answer is - no.

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