Question $3(15$ marks$)$

Klein, Leonard, and Mickle are partners in the KLM Partnership. Their profit and

loss sharing ratio is $3$:$2$:$1,$ respectively. Klein retires and is bought out by the

remaining partners. The partners' current capital account balances are $$147,000,$

$$98,000,$ and $$49,000,$ respectively. The plan is to revalue the Land and Inventory and

then for Leonard and Michle to buy Klein out. The new net income agreement for

Leonard and Mickle will be $1$:$3.$

Required

a$.$ The partners agree to revalue the assets. Land with a cost of $$90,000$ has a

current market value of $$120,000.$ Inventory with a cost of $$50,000$ has a

current market value of $$35,000.$ Prepare entries for these transactions.

b$.$ After the assets are revalued, the partnership agrees to give Klein $$75,000$

cash and a note payable for $$65,000.$ Prepare entries for these transactions

involving the retirement of Klein, and round to the nearest dollar.