Debbie Jenkins is to retire from the partnership of Jenkins and Associates as of
ID: 2417877 • Letter: D
Question
Debbie Jenkins is to retire from the partnership of Jenkins and Associates as of March 31, the end of the current fiscal year. After closing the accounts, the capital balances of the partners are as follows: Debbie Jenkins, $220,000; Jenny Watson, $125,000; and Pierre Periot, $140,000. They have shared net income and net losses In the ratio of 4:3:3. The partners agree that the merchandise inventory should be increased by $36,000, and the allowance for doubtful accounts should be increased by $2,000. Jenkins agrees to accept a note for $120,000 in partial settlement of her ownership equity. The remainder of her claim is to be paid in cash. Watson and Periot are to share equally in the net income or net loss of the new partnership. Journalize the entries to record the adjustment of the assets to bring them into agreement with current market prices and the withdrawal of Jenkins from the partnership).Explanation / Answer
(a)
Inventory A/c Dr $36,000
To Revaluation A/c Cr $36,000
(Being Inventory value restated to market value)
Bad Debt expense A/c Dr $2,000
To Allowance for doubtful accounts Cr $2,000
(Being allowance for doubtful accounts increased)
Revaluation A/c Dr $34,000
To Debbie Jenkins Capital A/c Cr $11,334
To Jenny Watson Capital A/c Cr $11,333
To Pierre Periot Capital A/c Cr $11,333
(gain upon the restatement entries 36000-2000 allocated to each partners capital accounts in equal ratio)
(b)
Debbie Jenkins Capital A/c Dr $208,667
To Note payable Cr $120,000
To Cash A/c Cr $88,667
(Being settlement of of Debbie Jenkins account upon his retirement)
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