December 31, 2008
Cash $ 80,000
Accounts Receivable 80,000
Total Assets $512,000
Liabilities and Partners' Equity
Formation, Operation, and Ownership Changes
Keith, Beth, and Donna share profits and losses 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 Keith is to be recognized as of December 31. The book values of all the other accounts are equal to their fair values. Beth withdrew from the partnership on December 31, 2008.
Prepare the journal entry or entries to record the withdrawal of Beth, given each of the following situations. Assume that the bonus method is used to account for the withdrawal.
1. Beth receives $36,624 cash and a $75,000 note from the partnership for his interest.
2. Donna purchases Beth's interest for $110,000.
3. The partnership gives Beth $35,000 cash and equipment with a book value and a fair value of $90,000 for his interest.
4. The partnership gives Beth $100,000 cash for his interest.
5. Beth sells one-fourth of his interest to Keith for $40,000 and three-fourths to Donna for $90,000
The attached MS Word document will show how each entry is recorded for ...
This solution is comprised of an advanced accounting problem that deasl with preparing adjusting entries to record the withdrawal of a partner. The problem shown here are taken from Advanced Accounting, Wiley Publishing, however, the detail step-by-step explanation of these complicated topics provides students with a clear understanding of the concepts. Thank you for using BrainMass.com. Have a great day!
Beacon and Dobbs: Prepare Profit and Loss Account
See the attached file.
Beacon and Dobbs have been in partnership as tailors for six years. Their incomplete trial balance at 31 December 19X8 is as follows.
Capital (at 1.1.X8):
- Beacon 8,000
- Dobbs 5,000
Purchases/sales 45,620 74,750
Debtors/creditors 1,210 4,360
Leasehold shop at cost 18,000
Equipment at cost 8,500
on equipment at 1.1.X8 1,200
Shop assistant wages 5,320
Light and heat 1,850
Bank charges 45
Stock at 1.1.X8 6,630
- Beacon 2,200
- Dobbs 1,800
(i) At the end of the year there is electricity accrued to the value of £60.
(ii) Stationery unused at the end of the year was valued at £50.
(iii) The equipment is depreciated at 10% per annum on a reducing balance basis. The leasehold property is not depreciated.
(iv) The stock at 31 December 19X8 was valued at £5,970.
(v) Dobbs made further drawings of £8,000 on 10 January 19X9.
(vi) Beacon and Dobbs have a partnership agreement which states that:
- each partner receives interest on their opening capital balances at 10% per annum
- salaries are to be paid at £6,200 per annum for Beacon and £4,875 for Dobbs
- the remainder of the profit is to be split equally between the partners.
(vii) Beacon paid £2,000 of capital into the business on 15 December 19X8.
Prepare the profit and loss account for Beacon and Dobbs for the year ended 31 December 19X8.View Full Posting Details