Question

Gale, McLean, and Lux are partners of Burgers and Brew Company with capital balances as follows: Gale, $91,000; McLean, $83,000; and Lux, $154,000. The partners share profit and losses in a 3:2:5 ratio. McLean decides to withdraw from the partnership. Prepare General Journal entries to record the May 1, 2017, withdrawal of McLean from the partnership under each of the following unrelated assumptions:

a. McLean sells his interest to Freedman for $175,000 after Gale and Lux approve the entry of Freedman as a partner (where McLean receives the cash personally from Freedman).

Record the admission of Freedman.

b. McLean gives his interest to a son-in-law, Park. Gale and Lux accept Park as a partner.

Record the admission of Park.

c. McLean is paid $83,000 in partnership cash for his equity.

Record withdrawal of McLean, where he is paid $83,000 in partnership cash for his equity.

d. McLean is paid $139,000 in partnership cash for his equity.

Record the withdrawal of McLean assuming, he is paid $139,000 in partnership cash for his equity.

e. McLean is paid $34,250 in partnership cash plus machinery that is recorded on the partnership books at $122,000 less accumulated depreciation of $90,000. (Round final answers to 2 decimal places.)

Record the withdrawal of McLean assuming, he is paid $34,250 in partnership cash plus machinery that is recorded on the partnership books at $122,000 less accumulated depreciation of $90,000.

Answer 1

Solution:

Journal Entries
S. No.	Particulars	Debit	Credit
a	Mclean's Capital Dr	$83,000.00
	To Freedman's Capital		$83,000.00
	(Being interest of melean sold to Freedman and freedman's admitted new partner)
b	Mclean's Capital Dr	$83,000.00
	To Park's Capital		$83,000.00
	(Being Mclean withdrawal from partnership and Park's admission in partnership recorded)
c	Mclean's Capital Dr	$83,000.00
	To Cash		$83,000.00
	(Being cash paid to Mclean's on withdrawl from partnership)
d-1	Gale's Capital A/c Dr($56,000*3/8)	$21,000.00
	Lux Capital A/c Dr	$35,000.00
	To Mclean's Capital ($139,000 - $83,000)		$56,000.00
	(Being shortfall in mclean's capital transferred from remaining partners)
d2	Mclean's Capital Dr	$139,000.00
	To Cash		$139,000.00
	(Being cash paid to Mclean's on withdrawl from partnership)
e1	Mclean's Capital Dr ($83,000 - $34,250 - $32000)	$16,750.00
	To Gale's Capital ($16,750*3/8)		$6,281.25
	To Lux's Capital ($16,750*5/8)		$10,468.75
	(Being excess in mclean's capital transferred to remaining partners)
e2	Mclean's Capital Dr	$66,250.00
	Accumulated Depreciation Dr	$90,000.00
	To Cash		$34,250.00
	To Machinery		$122,000.00
	(Being cash and machinery given to Mclean on withdrawl from partnership)