Question
The capital balances for the partnership of Diaz, Isidro, and Nelson are as follows: CapitalDiaz 1,500,000.00 CapitalIsidro 900,000.00 CapitalNelson 600,000.00 The partners share income in
| The capital balances for the partnership of Diaz, Isidro, and Nelson are as follows: | ||
| CapitalDiaz | 1,500,000.00 | |
| CapitalIsidro | 900,000.00 | |
| CapitalNelson | 600,000.00 | |
| 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. | ||
| Debit | Credit | |
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| Capital- Isidro | $ | $ |
| b. The partners agree to pay Nelson $750,000 of partnership cash. The bonus method is used. | ||
| Debit | Credit | |
| CapitalDiaz | $ | $ |
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| To record retirement bonus to Nelson. | ||
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| To record retirement payment to Nelson. | ||
| c. Same as b., but the partial goodwill approach is used. | ||
| Debit | Credit | |
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| To record partial goodwill. | ||
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| To record retirement payment to Nelson. | ||
| d. Same as b., but the total goodwill approach is used. | ||
| Debit | Credit | |
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| CapitalDiaz | $ | $ |
| CapitalIsidro | $ | $ |
| To record partial goodwill. | ||
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| 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. | ||
| Debit | Credit | |
| CapitalDiaz | $ | $ |
| CapitalIsidro | $ | $ |
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| To record difference attributed to overvalued land. | ||
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| Cash, Goodwill, Plant & Equip, or Capital Nelson, Caiptal Isidro, OR Capital Diaz | $ | $ |
| To record retirement payment to Nelson. |
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Accounting Costing And Management
Authors: Riad Izhar, Janet Hontoir
2nd Edition
9780198328230
