Ajax Architects is a partnership with three partners. On January 31, 2017, the three partners, Tova Radzik,

Question:

Ajax Architects is a partnership with three partners. On January 31, 2017, the three partners, Tova Radzik, Sela Kopel, and Etti Falkenberg, have capital balances of $98,000, $79,000, and $47,000, respectively. The profit and loss ratio is 4:3:1. On February 1, 2017, Radzik withdraws from the partnership and they agree to pay her $90,000 cash from the partnership assets.

After Radzik leaves, Kopel and Falkenberg agree to a 2:1 profit ratio. During the year ended January 31, 2018, the partnership earns profit of $45,000. Neither Kopel nor Falkenberg makes any withdrawals because the partner- ship is short of cash after paying Radzik. On March 1, 2018, Kopel and Falkenberg agree to admit Devra Malkin to the partnership with a 45% interest for $110,000 cash. After Malkin is admitted, the new profit ratio will be 4:2:5 for Kopel, Falkenberg, and Malkin, respectively.

Instructions

(a) Journalize the withdrawal of Radzik from the partnership.

(b) What are the balances in Kopel's and Falkenberg's capital accounts after Radzik leaves the partnership?

(d) What is the total partnership capital on February 1, 2018, prior to admitting Malkin?

(e) Prepare the journal entry to record the admission of Malkin in to the partnership.

(f) What is the balance in each of the partners' capital accounts after Malkin is admitted to the partnership?

TAKING IT FURTHER

Why might a partner who is withdrawing from a partnership agree to a cash payment that results in a bonus to the remaining partners?

Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...