Question

The partnership of Ace, Jack, and Spade has been in business for 25 years. On December 31, 20X5, Spade decided to retire. The partnership balance sheet reported the following capital balances for each partner at December 31, 20X5:

Ace, Capital	$	151,900
Jack, Capital		200,200
Spade, Capital		120,600

The partners allocate partnership income and loss in the ratio 20:30:50, respectively.

Required:
Record Spade’s withdrawal under each of the following independent situations.

a. Jack acquired Spade’s capital interest for $151,900 in a personal transaction. Partnership assets were not revalued, and partnership goodwill was not recognized. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record Spade's capital interest that was acquired in a personal transaction with Jack.

b. Jack acquired Spade’s capital interest for $150,600 in a personal transaction. Partnership assets were not revalued, and partnership goodwill applicable to the entire business was recognized by the partnership. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the recognition of goodwill and the allocation to the partners.

Record the transfer of capital.

c. Spade received $181,400 of partnership cash upon retirement. Capital of the partnership after Spade’s retirement was $291,300.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the payment of the bonus to Spade upon his retirement.

d. Spade received $60,600 of cash and partnership land with a fair value of $120,700. The carrying amount of the land on the partnership books was $101,600. Capital of the partnership after Spade’s retirement was $310,500. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the revaluation of land.

Record the payment of cash and land to Spade upon his retirement.

e. Spade received $151,700 of partnership cash upon retirement. The partnership recorded the portion of goodwill attributable to Spade. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the payment of $151,700 upon retirement to Spade and the recognition of goodwill.​​​​​​​

f. Spade received $151,700 of partnership cash upon retirement. The partnership goodwill attributable to all the partners was recorded. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the recognition of goodwill for the entire firm upon Spade's retirement.

Record the payment of the bonus to Spade upon his retirement.

g. Because of limited cash in the partnership, Spade received land with a fair value of $101,500 and a partnership note payable for $51,000. The land’s carrying amount on the partnership books was $60,300. Capital of the partnership after Spade’s retirement was $361,400. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the revaluation of land.

Record the settlement of Spade's share by giving land and notes payable.

Answer 1

Answer:

1. Jack acquired Spade’s capital interest in a personal transaction.

Particulars	Debit	Credit
Spade's capital	120600
Jack's capital		120600

b.

Amount paid by jack for Spade's capital Interest	151900
Recorded amount of spade's capital interest	120600
Goodwill attributable to Spade	31300
Spade's share of Profits	50%
Goodwill	62600

Particulars	Debit	Credit
Goodwill	62600
Ace's capital (20% * 62600)		12520
Jack's capital (30% * 62600)		18780
Spade's capital (50% * 62600)		31300
Spade's capital (120600 + 31300)	151900
Jack's capital		151900

c.

Amount paid to spade upon Retirement	181400
Spade's capital credit	120600
Bonus paid to spade - allocated to Ace and Jack in the ratio 40:60	60800

Spade's capital	120600
Ace's capital (40% * 60800)	24320
Jack's capital (60% * 60800)	36480
Cash		181400

Capital balance after retirement
Ace's capital (151900 - 24320)	127580
Jack's capital (200200 - 36480)	163720
Total capital	291300

d. Spade received 60,600 of cash and partnership land of fair value 120700. Capital of partnership after spade's retirement was 310,500

	Ace	Jack	Spade
Profit Ratio	20%	30%	50%
Capital Balance before spade's retirement	151900	200200	120600
Gain recognized on transfer of land to spade (120700 - 101600)	3820	5730	9550
Capital Balances after allocation of gain	155720	205930	130150

Amount paid to Spade (60600 + 120700)	181300
Spade's Capital Interest	130150
Bonus to spade allocated between Ace and Jack in the ratio 40:60	51150
Particulars	Debit	Credit
Land	19100
Ace's capital (20% * 19100)		3820
Jack's capital (30% * 19100)		5730
Spade's capital (50 % * 19100)		9550
Spade's capital	130150
Ace's capital (40% * 51150)	20460
Jack's capital (60% * 51150)	30690
Cash		60600
Land		120700

Capital balances after Spade's retirement
Ace's capital (155720 - 20460)	135260
Jack's capital (205930 - 30690)	175240
Total Capital	310500

e. Spade received $151,700 of partnership cash upon retirement and the goodwill attributable to spade is recorded

Amount paid to spade	151700
Spade's capital interest	120600
Goodwill attributable to Spade	31100

Particulars	Debit	Credit
Spade's capital	120600
Goodwill	31100
Cash		151700

f. Spade received $151,700 of partnership cash upon retirement and the goodwill attributable to all partners are recorded

Amount paid to spade	151700
Spade's capital interest	120600
Goodwill attributable to spade	31300
Spade's share of profit	50%
Goodwill attributable to all partners	62600

Particulars	Debit	Credit
Goodwill	62600
Ace's capital (20% * 62600)		12520
Jack's capital (30% * 62600)		18780
Spade's capital (50% * 62600)		31300
Spade's capital	151700
Cash		151700

g. Spade received land and notes payable upon retirement. The capital of the partnership after spade's retirement was $361400

	Ace	Jack	Spade
Profit ratio	20%	30%	50%
Capital balance before spade's retirement	151900	200200	120600
Allocation of gain of transfer of land (101500 - 60300	8240	12360	20600
Capital balance before spade's retirement, adjusted for gain	160140	212560	141200

Amount paid to spade (101500 + 51000)	152500
Spade's capital interest - adjusted	141200
Bonus given to spade - allocated between Ace and Jack in the ratio 40:60	11300

Particulars	Debit	Credit
Land	41200
Ace's capital (20% * 41200)		8240
Jack's capital (30% * 41200)		12360
Spade's capital (50% * 41200)		20600
Spade's capital	141200
Ace's capital (40% * 11300)	4520
Jack's capital (60% * 11300)	6780
Land		101500
Notes Payable		51000

Capital balances after Spade's retirement
Ace's capital (160140 - 4520)	155620
Jack's capital (212560 - 6780)	205780
Total Capital	361400