 There we have that so we could break that that difference out in that format now What's the difference going to be the difference? We need to break out. It's going to put that here equals the 200,000 minus the amount in the capital count, which is this 124 to 124 To that's what we need in order. That's the debit We're going to need in order for this journal entry to be in balance So when we're going to break it out at the 38 and again, that's a rounded number So notice if I go into the home tab numbers group and add decimals It's actually 37.5. We can do that here add decimals and also note that if we add up the total equals the sum of These two it should add up to one or home tab Percent a hundred percent. So we're going to break that out at thirty seven point five To M and sixty two point five to L. So in D 21 we can do that with a formula equals the seventy five eight Times the third thirty seven point five percent Means that we're gonna have to debit M's capital count reducing it by twenty eight four twenty five in F21 equals the seventy five eight times the sixty two point five and that gives us the forty seven three seventy five We add those two up, of course that adds up to the seventy five Eight so the Indian capital count if we want to think about what should the Indian capital count be after this This is where they started 151 2 and we could see that over here 151 2 and then it's going to be reduced by the 28 for 25 because this is the amount that was paid out in Access over the amount that's in the capital account for B So we're gonna do the same thing here. This equals this minus the forty seven three seventy five enter and Therefore that that's what the capital count should be at the end I could sum that up for the total capital account and There it is. So we're gonna create the journal entry now and once we do the journal entry then we would expect that These this number is going to go down to zero and this number should reflect the one 227 75 and this number should be the 217 225 and the two should add up to a total capital of 340 let's see if that happens. So we're gonna need a debit to the other two partners the other two partners being M here So I'm gonna copy M's capital count I'm gonna paste that in I 19 right-click pasted one two three and then we're gonna reduce this capital count with a debit So this is a credit here represented by the brackets. We need to make it go down. We're gonna do the opposite thing to it Which is a debit. We're gonna debit it by the 28 for 25 Which should bring it down to the one twenty two seven seven five there for we're gonna have the 28 for two five here. We're gonna do the same thing for L. So here's L L has a credit balance. We need to make it go down. We're gonna do the opposite thing to it Which is a debit copy that right-click copy gonna put a cursor in I 20 right-click and paste it one two three We're gonna debit that account by the forty seven three seventy five forty seven three seventy five after we post it L's capital count should then be the 217 225 Let's see if we are in balance if we add up our debits now They add up to 200,000 equals our credits if I add up all of them It adds up to zero meaning the debits minus the credits are equal because they add up to zero So let's post this out and see if it does what we think it should do. What do we think it should do? It should bring ends capital account here take be off the books and bring L's capital account here for a total capital account of 340 so Also want to point out that the way I built that Journal entry was best practices for me the way that I can think through it notice that we could say that we should have these two Debits on top and have it in a different order in in my opinion in a more complex Journal entry any format that you can look back on and say and Figure out what happened more easily is more important than having the debits on top But just keep that in mind if you're putting this into some other kind of format that you could have people that are You know kind of peeking and they want the debits on top. Okay, so let's post this out. We're gonna be over here in 020 so we are in 020 gonna select equals I'm gonna point to that 124 to that you bring this down to zero But it's out of balance like so we can see our accounting equation over here if we want to and then we're gonna go to the cash Cash is gonna be the second account cash is up here and we're gonna post it to 017 and see what happens equals the 200,000 what's gonna happen? Well cash is gonna go down That's a debit that we're doing the opposite thing to it goes down to 350 then we're gonna post the m capital count So here's m capital count here's where we're gonna post it in 019 Equals and let's point to that 28 to 425 that's gonna bring in capital count down to 122 775 then we're gonna post L's capital count here and we're gonna post that to 021 Equals and we're gonna point to that 47 375 that's gonna bring the capital count for L down to 217 225 the two capital counts now add up to 340 so that looks like it's doing what we expected to do here. We've got the 122 7 we've got the 217 225 and they add up to the 340 all right, so now we're gonna take one more scenario that will be very similar and We're gonna say well, what if we had the same information here But now B sells the capital interest to the partnership for only 50,000. So now we're selling it for 50,000 let's see what would happen if that was the case So now we're gonna do the same thing or B is selling to M and L It's just the amount that has now differed. So let's think about our journal entry first and then come back to the worksheet So first question is cash affected and yeah cash is affected because the partnership is once again pain B To pay off and buy the capital interest in this case So cash is gonna go down cash is a debit balance. We're gonna make it go down by doing the opposite thing to it Which in this case would be a credit. So I'm gonna copy cash I'm gonna put that in the second account. So I'm an I 31 I 32 I 32 Right click paste one two three the cash that is going to be paid out this time is only 50,000 So we're gonna put a negative for the credit 50,000 and when we hit enter will put the brackets and whatnot around it. So that's the Amount of cash being paid. We're paying for B's capital account. So now note that these capital account is Valued at more than the 50,000. So again, the question is well Why I mean if the capital account represents the value of the company and it's saying that she the capital account here has 124 to why is it that B would sell the capital account for only 50 and again? it's a negotiation between the partners and the the partner so the partnership and the partner and It could be for various reasons. It could be that you know they think that the the partnership is overvalued in some areas it could be that you know B really needs to needs to leave at some point and is willing to accept less money because of the Circumstances so whatever that negotiation is that's between the partner and the partnership for us We need to take this down to zero. There's 124 to B is now gone So how do we make that go down to zero? We do the opposite thing to it So we're gonna debit it. That's a credit represented by the brackets. We're gonna debit it So I'm gonna copy that gonna put that in I 31 right-click paste it one two three And we're gonna put it in there for 124 to Now we're gonna now we're out of bounds, of course We've got the debits are higher than the credits by 74 200 we're gonna need a credit of 74 200 What are we gonna credit the other two capital accounts here for M and L M and L are gonna actually increase their capital accounts By this amount because they paid out less than the capital account balance for B Therefore they're gonna split the difference in accordance to their profit sharing So once again, how are we gonna figure out what their profit sharing is? Well, we had a difference of three two five So one way we can do that is we can say well, let's make a new agreement where we're gonna have the three out of Divided by instead of ten now. We got three and five or eight so three over eight and entered So that's that point three seven five We could make that percent home tab Numbers percent and we could increase the decimals if we want to see more precision here like so and then B is gone Of course, then we're gonna go to N L we're gonna have the same thing we could say well, let's make it five out of eight five out of Three plus five so equals five over eight and that will be the new percent We're gonna put our curse of their home tab numbers and percent We can increase the decimals that should add up to one or 100 percent. So let's see if that's the case equals the sum and double-click the sum Highlighting the thirty seven five six two five adds up to one or of course 100 percent. All right now We're gonna have to break out this difference between the price that was paid and the amount in the capital count So in this case the capital count had 124 200 minus what was paid of 50? That's that difference that's 74 to that's the plug we need here 74 to and we're gonna break it out by thirty seven five two M and 62.5 percent to L. So let's do that with our formulas. This equals the seventy four two times the 37.5 percent And that that means that we're gonna have 27 8 25 increasing the capital count here So in this case, we started with 151 2 in the capital count Plus the 27 8 25 we're gonna increase into capital counting. So at the end of the day M This will go up from here to here. That's the idea and then We'll do the same thing over here in L. We're gonna say this equals 74 two times the 62.5 and enter So then we're gonna say this equals what the beginning capital account was plus what it goes up by here And there we have it and then we're gonna sum that up for the total capital account will sum the 179 25 and the 3 10 9 75 total capital account here So at the end of the day, what's going to happen M's capital account is going to go up to 179 25 B's going to zero And L is going to go up to 3 10 9 75 for a total capital account balance of 490 that's the book value of the company theoretically. All right, so let's post that over here That means that M we were left over here with the fact that we need some credits In order to balance this out the credits are going to go to M's capital count M has a credit balance If we credit again, it's going to make it go up. So I'm going to copy this I'm going to put our cursor in I 33 right click paste 1 2 3 We're going to credit the capital count balance for 27 8 25 so negative 27 8 25 enter We're going to do the same thing for L. L is going to go up. We have a credit balance here It's going to go up in the credit direction. We're going to copy that Put our cursor in I 34 right click paste 1 2 3 and the amount will be for the 46 3 75 so negative 46 3 75 Now before we post it, are we in balance? Well, if we highlight the credits they add up to 124 2 That's equal to the debits if we highlight the debits and the credits They add up to zero because the debits minus the credits add up to zero All right, let's post this out and see if it does what we wanted to do What do we want it to do again? We want this account to go to that We want this to go to zero and we want this account to go to this Which will give us a total capital of 490. Okay, so we're going to post out the b capital So here's B's capital. We're going to go to 034 to do so and select equals point to the 124 2 That will bring this amount down to zero Then we're going to go to the cash account. So here's cash. Here's cash We're going to put the entry here in 031 Equals point to the 50 that's going to bring cash down by 50 to 500 thousand Then we're going to point post the m capital. So here's m's capital We are in 033. We're going to select equals point to the 27 8 to 25. This is a credit. This is a credit It's going to make the credit go up in the credit direction. We're going to do the same thing for L's capital. Here's L's capital. We're going to post it in 035 Equals we're going to point to the 46 375 Credit will go up in the credit direction because we're doing the same thing to it Putting us back in balance with the green zeros down here And there we have the 179 25 179 25 the 3 10 9 75 3 10 9 75 If we add these two up adds up to the 490, which is the 490