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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