Ngozi and Musa with a capital of #30,000 each decide to admit Mary into the partnership business with a capital of #20,000 and goodwill #15,000.If the profits and losses are to be shared equally, the journal entries to record goodwill are
-
debit goodwill #15,000, cash #20,000 and credit Mary's capital #35,000
- credit goodwill #15,000, cash #20,000 and debit Mary's #35,000
- debit goodwill #15,000, credit cash #20,000 and credit Mary's capital #20,000
- debit old partners capital #15,000, credit cash #20,000 and Mary's capital #35,000
The correct answer is: A
Explanation
Mary's capital contributed will be 15000 + 20000 = 35000 and will reflect a credit balance because money has gone out of Mary's purse
Goodwill will have a debit balance and moved to the balance sheet