The Prince-Robbins partnership has the following capital account balances on January 1, 2021: Prince, Capital $ 120,000
Robbins, Capital 110,000
Prince is allocated 60 percent of all profits and losses with the remaining 40 percent assigned to Robbins after interest of 10 percent is given to each partner based on beginning capital balances.
On January 2, 2021, Jeffrey invests $67,000 cash for a 20 percent interest in the partnership. This transaction is recorded by the goodwill method. After this transaction, 10 percent interest is still to go to each partner. Profits and losses will then be split as follows: Prince (50 percent), Robbins (30 percent), and Jeffrey (20 percent). In 2021, the partnership reports a net income of $25,000.
a. Prepare the journal entry to record Jeffrey’s entrance into the partnership on January 2, 2021.
-Record the entry for goodwill allocation, during the admission of a new partner.
Record the cash received from new partner.
b. Prepare a schedule showing how the 2021 net income allocation to the partners should be determined.