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ID: 2391779 • Letter: R
Question
Required information
[The following information applies to the questions displayed below.]
Meir, Benson, and Lau are partners and share income and loss in a 2:3:5 ratio. The partnership's capital balances are as follows: Meir, $58,000; Benson, $89,000; and Lau, $153,000. Benson decides to withdraw from the partnership, and the partners agree not to have the assets revalued upon Benson's retirement.
Prepare the journal entry to record Benson's withdrawal from the partnership under each of the following independent assumptions. (Do not round intermediate calculations.)
Benson (a) sells her interest to North for $160,000 after Meir and Lau approve the entry of North as a partner; (b) gives her interest to a son-in-law, Schmidt, and thereafter Meir and Lau accept Schmidt as a partner; (c) is paid $89,000 in partnership cash for her equity; (d) is paid $127,000 in partnership cash for her equity; and (e) is paid $16,000 in partnership cash plus equipment recorded on the partnership books at $36,000 less its accumulated depreciation of $11,600.
Record the withdrawal of Benson sells her interest to North for $160,000 after Meir and Lau approve the entry of North as a partner.
Record the withdrawal of Benson on the assumption that she gives her interest to a son-in-law, Schmidt and thereafter Meir and Lau accept Schmidt as a partner.
Record the withdrawal of Benson on the assumption that she is paid $89,000 in partnership cash for her equity.
Record the withdrawal of Benson on the assumption that she is paid $127,000 in partnership cash for her equity.
Record the withdrawal of Benson on the assumption that she is paid $16,000 in partnership cash plus equipment recorded on the partnership books at $36,000 less its accumulated depreciation of $11,600 for her equity.
Assume that Benson does not retire from the partnership described in Part 1. Instead, Rhode is admitted to the partnership on February 1 with a 25% equity. Prepare journal entries to record Rhode’s entry into the partnership under each of the following separate assumptions: Rhode invests (a) $100,000; (b) $73,000; and (c) $131,000. (Do not round your intermediate calculations.)
Record the admission of Rhode with an investment of $100,000 for a 25% interest in the equity.
Record the admission of Rhode with an investment of $73,000 for a 25% interest in the equity.
Record the admission of Rhode with an investment of $131,000 for a 25% interest in the equity.
Explanation / Answer
Answer- 1
a) Benson sells her interest to North for $160,000:
Date
Account Title and Explanation
Debit
Credit
a)
Benson's Capital
89000
North's Capital
89000
(To record withdrawal of Benson from partnership)
Note: Transaction will be recorded at book value of Benson’s capital, payment of $ 160,000 by North is personal transaction with Benson.
b) Benson gives her interest to a son-in-law, Schmidt.
Date
Account Title and Explanation
Debit
Credit
b)
Benson's Capital
89000
Schmidt's Capital
89000
(To record withdrawal of Benson from partnership)
c) Benson is paid $89,000 in partnership cash for her equity:
Date
Account Title and Explanation
Debit
Credit
c)
Benson's Capital
89000
Cash
89000
(To record withdrawal of Benson from partnership)
d) Benson is paid $127,000 in partnership cash for her equity:
Date
Account Title and Explanation
Debit
Credit
d)
Benson's Capital
89000
Meir's Capital (127000 - 89000) * 2/7
10857
Lau's Capital (127000 - 89000) * 5/7
27143
Cash
127000
(To record withdrawal of Benson from partnership with bonus to Benson)
e) Benson is paid $16,000 in partnership cash plus equipment recorded on the partnership books at $36,000 less its accumulated depreciation of $11,600.
Date
Account Title and Explanation
Debit
Credit
e)
Benson's Capital
89000
Cash
16000
Equipment (36,000 - 11600)
24400
Meir's Capital (89000 - 16000 - 24400) * 2/7
13886
Lau's Capital (89000 - 16000 - 24400) * 5/7
34714
(To record withdrawal of Benson from partnership with bonus to remaining partner)
Answer- 2:
a) Rhode is admitted with an investment of $100,000
Total Capital of Existing Partners (58k + 89k + 153k) = 300,000
Add: Capital brought by new partner Rhodes = 100,000
Total Capital = 400,000
Rohde’s share = 400,000 * 25% = 100,000
No Bonus is paid or received by old partners.
Date
Account Title and Explanation
Debit
Credit
a)
Cash
100000
Rhode's Capital
100000
(To record the admission of Rhode in partnership)
b) Rhode is admitted with an investment of $73,000
Total Capital of Existing Partners (58k + 89k + 153k) = 300,000
Add: Capital brought by new partner Rhodes = 73,000
Total Capital = 373,000
Rohde’s share = 373,000 * 25% = 93,250
Bonus is paid to Rhode $ 20,250 to be shared by old partners in 2:3:5
Date
Account Title and Explanation
Debit
Credit
b)
Cash
73000
Meir's Capital (20,250*2/10)
4050
Benson's Capital (20,250*3/10)
6075
Lau's Capital (20,250*5/10)
10125
Rhode's Capital
93250
(To record the admission of Rhode in partnership and Bonus)
c) Rhode is admitted with an investment of $131,000
Total Capital of Existing Partners (58k + 89k + 153k) = 300,000
Add: Capital brought by new partner Rhodes = 131,000
Total Capital = 431,000
Rohde’s share = 373,000 * 25% = 107,750
Bonus is paid by Rhode $ 23,250 to be shared by old partners in 2:3:5
Date
Account Title and Explanation
Debit
Credit
c)
Cash
131000
Rhode's Capital
107750
Meir's Capital (23,250*2/10)
4650
Benson's Capital (23,250*3/10)
6975
Lau's Capital (23,250*5/10)
11625
(To record the admission of Rhode in partnership and Bonus)
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Date
Account Title and Explanation
Debit
Credit
a)
Benson's Capital
89000
North's Capital
89000
(To record withdrawal of Benson from partnership)
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