Question
Pharoah Accountants is a partnership with three partners. On February 28, 2021, the three partners, M. Kumar, H. Deol, and A. Kassam, have capital balances
Pharoah Accountants is a partnership with three partners. On February 28, 2021, the three partners, M. Kumar, H. Deol, and A. Kassam, have capital balances of $83,800, $68,500, and $39,500, respectively. The profit and loss ratio is 4:3:1. On March 1, 2021, Deol withdraws from the partnership and the remaining partners agree to pay him $87,500 cash from the partnership assets. After Deol leaves, Kumar and Kassam agree to a 4:2 profit ratio. During the year ended February 28, 2022, the partnership earns a profit of $21,600. Neither Kumar nor Kassam makes any withdrawals because the partnership is short of cash after paying Deol. On March 1, 2022, Kumar and Kassam agree to admit C. Mawani to the partnership with a 45% interest for $72,300 cash. After Mawani is admitted, the new profit ratio will be 4:2:5 for Kumar, Kassam, and Mawani, respectively.
Journalize the withdrawal of Deol from the partnership. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
| Date | Account Titles and Explanation | Debit | Credit |
| Mar. 1 | H. Deol, CapitalA. Kassam, CapitalIncome SummaryCashM. Kumar, Capital | ||
| H. Deol, CapitalA. Kassam, CapitalCashIncome SummaryM. Kumar, Capital | |||
| A. Kassam, CapitalIncome SummaryM. Kumar, CapitalCashH. Deol, Capital | |||
| CashA. Kassam, CapitalM. Kumar, CapitalIncome SummaryH. Deol, Capital | |||
| (To record withdrawal of partner.) |
What are the balances in Kumar's and Kassam's capital accounts after Deol leaves the partnership?
| M. Kumar, Capital | $ | |
| A. Kassam, Capital | $ |
Prepare the journal entry to close the income summary account on February 28, 2022. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
| Date | Account Titles and Explanation | Debit | Credit |
| Feb. 28 | M. Kumar, CapitalCashA. Kassam, CapitalIncome SummaryH. Deol, Capital | ||
| Income SummaryM. Kumar, CapitalH. Deol, CapitalCashA. Kassam, Capital | |||
| CashIncome SummaryH. Deol, CapitalA. Kassam, CapitalM. Kumar, Capital | |||
| (To close Income Summary.) |
What is the total partnership capital on March 1, 2022, prior to admitting Mawani?
| Total partnership capital | $ |
Prepare the journal entry to record the admission of Mawani into the partnership. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
| Date | Account Titles and Explanation | Debit | Credit |
| Mar. 1 | CashIncome SummaryM. Kumar, CapitalC. Mawani, CapitalA. Kassam, Capital | ||
| CashIncome SummaryA. Kassam, CapitalM. Kumar, CapitalC. Mawani, Capital | |||
| M. Kumar, CapitalA. Kassam, CapitalC. Mawani, CapitalCashIncome Summary | |||
| C. Mawani, CapitalA. Kassam, CapitalM. Kumar, CapitalIncome SummaryCash | |||
| (To record admission of partner.) |
What is the balance in each of the partners' capital accounts after Mawani is admitted to the partnership?
| Balance | ||
| M. Kumar, Capital | $ | |
| A. Kassam, Capital | ||
| C. Mawani, Capital | ||
| Total partnership capital | $ |
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Authors: Marilyn Strathern
1st Edition
0415233275, 978-0415233279
