E 16-11 rement entries Capital balances and profit- and loss-sharing ratios for
ID: 2329836 • Letter: E
Question
E 16-11 rement entries Capital balances and profit- and loss-sharing ratios for the Nix, Man, and Per partnership on December 31, 2016, just before the retirement of Nix, are as follows: Nix capital (30%) Man capital (30%) Per capital (40%) 128,000 $140,000 $160,000 On January 2, 2017, Nix is paid $170,000 cash on his retirement. REQUIRED: Prepare the journal entry or entries to record Nix's retirement assuming that goodwill, as implied by the payment to Nix, is recorded on the partnership booksExplanation / Answer
Solution:
Total payment on Nix retirement = $170,000
Nix capital balance = $128,000
Nix share of goodwill = $170,000 - $128,000 = $42,000
Goodwill of the firm = $42,000 / 30% = $140,000
Journal Entries Date Particulars Debit Credit 2-Jan-17 Goodwill Dr $140,000.00 To Nix Capital $42,000.00 To Man Capital $42,000.00 To Per Capital $56,000.00 (To record goodwill on retirement of nix) 2-Jan-17 Nix capital Dr $170,000.00 To Cash $170,000.00 (To record payment to nix on retirement)Related Questions
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