Personal Financial Services is a partnership owned by three individuals. The partners share profits and losses in the ratio of 28 percent to Dan Smythe, 38 percent to Max Lark, and 34 percent to Emily Spahn. At December 31, 19X7, the firm has the following balance sheet:

Lark withdraws from the partnership on December \(31,19 \mathrm{X} 7\), to establish his own consulting practice.
\section*{Required}
Record Lark's withdrawal from the partnership under the following plans:
1. Lark gives his interest in the business to Terry Boyd, his nephew.
2. In personal transactions, Lark sells his equity in the partnership to Bea Patell and Al Bruckner, who each pay Lark \(\$ 40,000\) for half his interest. Smythe and Spahn agree to accept Patell and Bruckner as partners.
3. The partnership pays Lark cash of \(\$ 15,000\) and gives him a note payable for the remainder of his book equity in settlement of his partnership interest.
4. Lark receives cash of \(\$ 10,000\) and a note for \(\$ 70,000\) from the partnership.
5. The partners agree that the building is worth only \(\$ 280,000\) and that its accumulated depreciation should remain at \(\$ 70,000\). After the revaluation, the partnership settles with Lark by giving him cash of \(\$ 14,100\) and a note payable for the remainder of his book equity.

Transcribed Image Text:

Cash. Accounts receivable. Less allowance for uncollectibles....... Building.. Less accumulated depreciation. Total assets... $ 12,000 Total liabilities......... $ 75,000 $ 22,000 4,000 $310,000 18,000 Smythe, capital. 83,000 Lark, capital... 50,000 Spahn, capital 62,000 70,000 240,000 $270,000 Total liabilities and capital......... $270,000