17.Linda Ratzlaff decides to purchase from an existing partner for $50,000 a one

Question

17.Linda Ratzlaff decides to purchase from an existing partner for $50,000 a one-third interest in a partnership. What effect does this transaction have on partnership net assets? *18. Steve Renn decides to invest $25,000 in a partnership for a one-sixth capital interest. How much do the partnership's net assets increase? Does Renn also acquire a one-sixth income ratio through this investment? *19. Kate Robidou purchases for $72,000 Grant's interest in the Sharon-Grant partnership. Assuming that Grant has a $66,000 capital balance in the partnership, what journal entry is made by the partnership to record this transaction? *20. Tracy Harper has a $39,000 capital balance in a partnership. She sells her interest to Kim Remington for $45,000 cash. What entry is made by the partnership for this transaction? *21. Debbie Perry retires from the partnership of Garland, Newlin, and Perry. She receives $85,000 of partnership assets in settlement of her capital balance of $77,000. Assuming that the income- sharing ratios are 5 : 3 : 2, respectively, how much of Perry's bonus is debited to Newlin's capital account? *22. Your roommate argues that partnership assets should be revalued in situations like those in question 21. Why is this generally not done? *23. How is a deceased partner's equity determined?

Explanation / Answer

This purchase transition will increase the partnership interest of Linda Ratzlaff and reduce the partnership interest of the selling partner by 1/3 of total interest. Since in this transaction, Linda is paying and only the selling partner is getting the money, there will be no effect on organizational front. It is just the transfer of interest. Hence, Net Asset will remain unchanged.

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