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Death or Retirement of a Partner

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PARTNERSHIP ACCOUNTS
CHANGE IN THE PARTNERSHIP
RETIREMENT OF A PARTNER
QUESTION
A summary balance sheet for the Singh, Deonarine, and Maharaj partnership on December 31, 2011 is shown below. Partners Singh, Deonarine, and Maharaj allocate profit and loss in their respective ratios of 3:2:1. The partnership agreed to pay partner Deonarine $500,000 for his partnership interest upon his retirement from the partnership on January 1, 2012. The partnership financials on January 1, 2012 are:

Assets
Cash $ 70,000
Marketable securities 190,000
Inventory 360,000
Land 110,000
Building-net 570,000
Total assets $1,300,000

Equities
Singh, capital $630,000
Deonarine, capital 420,000
Maharaj, capital 250,000
Total equities $1,300,000

Required:
Prepare the journal entry to reflect Deonarine's retirement from the partnership:

1. Assuming a bonus to Deonarine. 7 marks

2. Assuming a revaluation of total partnership capital based on excess payment. 10 marks

3. Assuming goodwill equal to the excess payment is recorded. 8 marks

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Partnership accounting - Three different ways that partnerships account for the death or retirement of a partner.

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PARTNERSHIP ACCOUNTS
CHANGE IN THE PARTNERSHIP
RETIREMENT OF A PARTNER
QUESTION
A summary balance sheet for the Singh, Deonarine, and Maharaj partnership on December 31, 2011 is shown below. Partners Singh, Deonarine, and Maharaj allocate profit and loss in ...

Purchase this Solution
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