Adjusting Entries for Partnership Withdrawal
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The December 31, 2008, balance sheet of the Solis Partnership is shown below.
Solis 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
Keith, Capital 220,000
Beth, Capital 110,000
Donna, Capital 100,000
Total Liabilities and Partners' Equity $512,000
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.
Required:
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
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Solution Summary
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!
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