Chapter 15, Problem 15.9E

To determine

Disassociation of a partner:When a partner withdraws or retires from a partnership, that partner is disassociated from the partnership. In most cases, the partnership purchases the disassociated partner’s interest in the partnership for a buyout price. Section 701 of UPA 1997 states that the buyout price is the estimated amount if, the partnership assets were sold at a price equal to the higher of the liquidation value or the value based on a sale of entire business as a going concern without the disassociated partner and the partnership was wound up and all partnership obligations settled. The partnership must pay interest to the disassociated partner from the date of disassociation to date of payment.

The journal entry to record K’s withdrawal when K is paid $38,000 and no goodwill is recorded.

To determine

Disassociation of a partner:When a partner withdraws or retires from a partnership, that partner is disassociated from the partnership. In most cases, the partnership purchases the disassociated partner’s interest in the partnership for a buyout price. Section 701 of UPA 1997 states that the buyout price is the estimated amount if, the partnership assets were sold at a price equal to the higher of the liquidation value or the value based on a sale of entire business as a going concern without the disassociated partner and the partnership was wound up and all partnership obligations settled. The partnership must pay interest to the disassociated partner from the date of disassociation to date of payment.

The journal entry to record K’s withdrawal when K is paid $42,000 and only his share of goodwill is recorded.

To determine

Disassociation of a partner:When a partner withdraws or retires from a partnership, that partner is disassociated from the partnership. In most cases, the partnership purchases the disassociated partner’s interest in the partnership for a buyout price. Section 701 of UPA 1997 states that the buyout price is the estimated amount if, the partnership assets were sold at a price equal to the higher of the liquidation value or the value based on a sale of entire business as a going concern without the disassociated partner and the partnership was wound up and all partnership obligations settled. The partnership must pay interest to the disassociated partner from the date of disassociation to date of payment.

the journal entry to record K’s withdrawal when K is paid $35,000 and all implied goodwill is recorded.

To determine

Disassociation of a partner:When a partner withdraws or retires from a partnership, that partner is disassociated from the partnership. In most cases, the partnership purchases the disassociated partner’s interest in the partnership for a buyout price. Section 701 of UPA 1997 states that the buyout price is the estimated amount if, the partnership assets were sold at a price equal to the higher of the liquidation value or the value based on a sale of entire business as a going concern without the disassociated partner and the partnership was wound up and all partnership obligations settled. The partnership must pay interest to the disassociated partner from the date of disassociation to date of payment.

To explain:The computation of buyout price summarizing the guidelines in UPA 1997.