Admitting New Partner Who Contributes Assets After the tangible assets have been adjusted to current market prices, the capital accounts of Brad Paulson and Drew Webster have balances of $45,000 and $60,000, respectively. Austin Neel is to be admitted to the partnership, contributing $30,000 cash to the partnership, for which he is to receive an ownership equity of $35,000. All partners share equally in income. Required:
a. Journalize the entry to record the admission of Neel, who is to receive a bonus of $5,000.
b. What are the capital balances of each partner after the admission of the new partner?
c. Why are tangible assets adjusted to current market prices prior to admitting a new partner?

a. Journal Entry to record admission of Neil

Date       Account Title and Explanation      Debit     Credit

31-Dec    Cash  Account                              $30,000

               Brad Paulson capital Account     $2,500

               ($5000/2)

               Drew Webster Capital                   $2,500

                ($5000/2)

                       To Austin Neel capital A/c                     $35,000        

b. Capital account balances after admission of new partner

Date       Account Title and Explanation        Debit        Credit

               Brad paulson capital Account         $42,500

               ($45000-$2500)  

                Drew Webster Capital Account      $57,500

                ($60000-$2500)  

                        To Austin Neel capital Account                $35,000

c. Tangible assets should be adjusted to current market prices so that the new partner does not share in any gains or losses from changes in market prices prior to being admitted.

a. primarily outdoors, responding to emergencies and protecting people.

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