Nguyen, Tran and Le are partners sharing profits and losses equally and with capital balances of...

Nguyen, Tran and Le are partners sharing profits and losses equally and with capital balances of $225, $675 and $450 respectively. Before Tran leaves the partnership the assets are revalued. An independent valuer assesses the equipment to be worth $12 less than the carrying amount (book value), and property $147 more than the carrying amount.

a) Prepare the journal entries to record the revaluation of property and equipment.

b) Prepare the journal entries to record the revaluation of property and equipment if the partnership agreement specifies profits and losses are allocated on the basis of the capital balances.

c) Prepare the journal entries to record the retirement of Tran (after revaluation and profits and losses are allocated on the basis of capital balances as in (b) above) if she is allowed to take $842.50 in cash (record to the nearest cent)

Expert Solution

a.) Journal Entries to Record the Revaluation of Property

Description		DEBIT	CREDIT
Property		$147.00
	Equipment		$12.00
	Profit on Revaluation of Assets		$135.00
( Assets revalued and profit recognized in the books of accounts)

Profit on Revaluation of Assets		$135.00
	Nguyen		$45.00
	Tran		$45.00
	Le		$45.00
( Profit on revaluation of assets distributed to partners
equally among them)



b.) Journal Entries to Record the Revaluation of Property

Capital Ratio of Partners = 225:670:450

Description		DEBIT	CREDIT
Property		$147.00
	Equipment		$12.00
	Profit on Revaluation of Assets		$135.00
( Assets revalued and profit recognized in the books of accounts)

Profit on Revaluation of Assets		$135.00
	Nguyen(225*135/1345)		$22.58
	Tran(670*135/1345)		$67.25
	Le(450*135/1345)		$45.17
( Profit on revaluation of assets distributed to partners
equally among them)


c.)


Description		DEBIT	CREDIT
Property		$147.00
	Equipment		$12.00
	Profit on Revaluation of Assets		$135.00
( Assets revalued and profit recognized in the books of accounts)

Profit on Revaluation of Assets		$135.00
	Nguyen(225*135/1345)		$22.50
	Tran(675*135/1345)		$67.50
	Le(450*135/1345)		$45.00
( Profit on revaluation of assets distributed to partners
equally among them)

Tran(67.25+670)		742.25
Advance to Tran		100.25
	Cash		842.5
(Cash Distributed to TRAN above and over his Capital)

Thank You

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