Question

Meir, Benson, and Lau are partners and share income and loss in a 2:3:5 ratio (in percents: Meir, 20%; Benson, 30%; and Lau, 50%). The partnership's capital balances are as follows: Meir, $48,000; Benson, $74,000; and Lau, $128,000. Benson decides to withdraw from the partnership. 1. Prepare the journal entry to record Benson's withdrawal under each independent assumptions. (Do not round intermediate calculations.) (a) Benson sells her interest to North for $160,000 after North is approved as a partner; (b) Benson gives her interest to a son-in-law, Schmidt, and Schmidt is approved as a partner; (c) Benson is paid $74,000 in partnership cash for her equity; (d) Benson is paid $112,000 in partnership cash for her equity; and (e) Benson is paid $14,500 in partnership cash plus equipment recorded on the partnership books at $34,500 less its accumulated depreciation of $11,600.

Answer 1

1

(a) Benson sells her interest to North for $160,000 after Meir and Lau approve the entry of North as a partner..

Benson capital A/c Dr. $74,000

     North Capital A/c Cr.     $74,000

(b) Benson gives her interest to a son-in-law, Schmidt, and thereafter Meir and Lau accept Schmidt as a partner.

Benson capital A/c Dr. $74,000

     Schmidt Capital A/c Cr.     $74,000

(c) Benson is paid $74,000 in partnership cash for her equity.

Benson capital A/c Dr. $74,000

Cash A/c Cr.                        $74,000

(d) Benson is paid $112,000 in partnership cash for her equity.

Benson capital A/c Dr. $74,000

Goodwill A/cDr.              $38,000

     Cash A/c Cr.                        $112,000

(e) Benson is paid $14,500 in partnership cash plus equipment recorded on the partnership books at $34,500 less its accumulated depreciation of $11,600.

Benson capital A/c Dr. $74,000

Cash A/c Cr.                        $14,500

Machiner A/c Cr.               $22,900

Reserve A/c Cr.                 $36,600