Question
The capital balances for the partnership of Diaz, Isidro, and Nelson are as follows: CapitalDiaz $1,500,000 CapitalIsidro 900,000 CapitalNelson 600,000 The partners share income in
The capital balances for the partnership of Diaz, Isidro, and Nelson are as follows:
| CapitalDiaz | $1,500,000 |
| CapitalIsidro | 900,000 |
| CapitalNelson | 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 Nelsons interest for $800,000.
b. The partners agree to pay Nelson $750,000 of partnership cash. The bonus method is used.
*********How would the entry be recorded if the total goodwill approach was used?
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