The December 31, 2008, balance sheet of the Datamation Partnership is shown below. Datamation Partnership Balance Sheet December 31, 2008 Assets Cash.............$ 80,000 Accounts Receivable......80,000 Inventory..........62,000 Equipment.........290,000 Total Assets.........$512,000 Liabilities and Partners’ Equity Accounts Payable...............$ 60,000 Notes Payable to Dave, 8% dated September 1, 2008..22,000 Dave, Capital..................220,000 Allen, Capital..................110,000 Matt, Capital..................100,000 Total Liabilities and Partners’ Equity..........$512,000 Dave, Allen, and Matt share profits and loses in the ratio of 50:30:20. The inventory on December 31 has a fair value of $68,000; accrued interest on the note payable to Dave is to be recognized as of December 31. The book values of all the other accounts are equal to their fair values. Allen withdrew from the partnership on December 31, 2008. Required: Prepare the journal entry or entries to record the withdrawal of Allen, given each of the following situations. Assume that the bonus method is used to account for the withdrawal. 1. Allen receives $36,624 cash and a $75,000 note from the partnership for his interest. 2. Matt purchases Allen’s interest for $110,000. 3. The partnership gives Allen $35,000 cash and equipment with a book value and a fair value of $90,000 for his interest. 4. The partnership gives Allen $100,000 cash for his interest. 5. Allen sells one-fourth of his interest to Dave for $40,000 and three-fourths to Matt for $90,000.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
The December 31, 2008, balance sheet of the Datamation Partnership is shown below.
Datamation Partnership
Balance
Sheet
December 31, 2008
Assets
Cash.............$ 80,000
Inventory..........62,000
Equipment.........290,000
Total Assets.........$512,000
Liabilities and Partners’ Equity
Accounts Payable...............$ 60,000
Notes Payable to Dave, 8% dated September 1, 2008..22,000
Dave, Capital..................220,000
Allen, Capital..................110,000
Matt, Capital..................100,000
Total Liabilities and Partners’ Equity..........$512,000
Dave, Allen, and Matt share profits and loses in the ratio of 50:30:20. The inventory on
December 31 has a fair value of $68,000; accrued interest on the note payable to Dave is to be recognized as of December 31. The book values of all the other accounts are equal to their fair values. Allen withdrew from the partnership on December 31, 2008.
Required:
Prepare the
1. Allen receives $36,624 cash and a $75,000 note from the partnership for his interest.
2. Matt purchases Allen’s interest for $110,000.
3. The partnership gives Allen $35,000 cash and equipment with a book value and a fair value of $90,000 for his interest.
4. The partnership gives Allen $100,000 cash for his interest.
5. Allen sells one-fourth of his interest to Dave for $40,000 and three-fourths to Matt for $90,000.
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