Partner Retirement: Various Cases The capital balances for the partnership of Diaz, Isidro, and Nelson are as follows: Capital-Diaz $1,500,000 Capital-Isidro 900,000 Capital-Nelson 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 Nelson's interest for $800,000. Description Debit Credit Capital Nelson 600,000 Goodwill 200,000 Capital-Isidro 0 800,000 b. The partners agree to pay Nelson $750,000 of partnership cash. The bonus method is used. Description Debit Credit Capital-Diaz Capital Nelson Cash To record retirement bonus to Nelson. 0 To record retirement payment to Nelson. C. Same as b, but the partial goodwill approach is used. Description Debit Credit To record partial goodwill. 0 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. 0 0 To record retirement payment to Nelson. Partner Retirement: Various Cases The capital balances for the partnership of Diaz, Isidro, and Nelson are as follows: Capital-Diaz $1,500,000 Capital-Isidro 900,000 Capital-Nelson 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 Nelson's interest for $800,000. Description Debit Credit Capital Nelson 600,000 Goodwill 200,000 Capital-Isidro 0 800,000 b. The partners agree to pay Nelson $750,000 of partnership cash. The bonus method is used. Description Debit Credit Capital-Diaz Capital Nelson Cash To record retirement bonus to Nelson. 0 To record retirement payment to Nelson. C. Same as b, but the partial goodwill approach is used. Description Debit Credit To record partial goodwill. 0 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. 0 0 To record retirement payment to Nelson
