Question
23. Partner Retirement: Various Cases The capital balances for the partnership of Diaz, Isidro, and Nelson are as follows: CapitalDiaz $1,500,000 CapitalIsidro 900,000 CapitalNelson 600,000
23.
Partner Retirement: Various Cases
The capital balances for the partnership of Diaz, Isidro, and Nelson are as follows:
| CapitalDiaz | $1,500,000 |
| CapitalIsidro | 900,000 |
| CapitalNelson | 600,000 |
The partners share income in a 2:4:4 ratio. Nelson decides to retire. Diaz and Isidro continue the partnership, sharing income in a 2:4 (1:2) ratio.
Required
Prepare the journal entry or entries to record the retirement of Nelson in each of the following scenarios:
a. Diaz and Isidro use their personal assets to buy Nelsons interest for $800,000.
| Description | Debit | Credit |
|---|---|---|
| Capital-Nelson | ||
| Capital-Diaz | ||
| Capital-Isidro |
b. The partners agree to pay Nelson $750,000 of partnership cash. The bonus method is used.
| Description | Debit | Credit |
|---|---|---|
| Capital-Diaz | ||
| To record retirement bonus to Nelson. | ||
| To record retirement payment to Nelson. |
c. Same as b., but the partial goodwill approach is used.
| Description | Debit | Credit |
|---|---|---|
| To record partial goodwill. | ||
| To record retirement payment to Nelson. |
d. Same as b., but the total goodwill approach is used.
| Description | Debit | Credit |
|---|---|---|
| Capital-Diaz | ||
| Capital-Isidro | ||
| To record total goodwill. | ||
| To record retirement payment to Nelson. |
e. The partners agree to pay Nelson $450,000 of partnership cash. The difference is attributed to overvalued plant and equipment, and the total goodwill approach is used.
| Description | Debit | Credit |
|---|---|---|
| Capital-Diaz | ||
| Capital-Isidro | ||
| To record difference attributed to overvalued land. | ||
| To record retirement payment to Nelson. |
Please answer all parts of the question.
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