Partnership and Following Separate Assumptions

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Part 1 Goering, Zarcus, and Schmit are partners and share income and loss in a 3:2:5 ratio. The partnership’s capital balances are as follows: Goering, $84,000; Zarcus, $69,000; and Schmit, $147,000. Zarcus decides to withdraw from the partnership, and the partners agree to not have the assets revalued upon Zarcus’s retirement. Prepare journal entries to record Zarcus’s February 1 withdrawal from the partnership under each of the following separate assumptions: Zarcus (a) Sells her interest to Getz for $80,000 after Goering and Schmit approve the entry of Getz as a partner; (b) Gives her interest to a son-in-law, Swanson, and thereafter Goering and Schmit accept Swanson as a partner; (c) Is paid $69,000 in partnership cash for her equity;

(d) Is paid $107,000 in partnership cash for her equity; and (e) Is paid $15,000 in partnership cash plus equipment recorded on the partnership books at $35,000 less its accumulated depreciation of $11,600.

Part 2 Assume that Zarcus does not retire from the partnership described in Part 1. Instead, Ford is admitted to the partnership on February 1 with a 25% equity. Prepare journal entries to record Ford’s entry into the partnership under each of the following separate assumptions: Ford invests (a) $100,000;

(b) $74,000; and
(c) $131,000.

SOLUTION

Part 1

a)
|Feb. 1 |Zarcus, Capital |69,000 | | | | Getz, Capital | |69,000 | | | To record admission of Getz. | | |

b)
|Feb. 1 |Zarcus, Capital |69,000 | | | | Swanson, Capital | |69,000 | | | To record admission of Swanson. | | |

c)
|Feb. 1 |Zarcus, Capital |69,000 | | | | Cash | |69,000 | | | To record withdrawal of Zarcus with no bonus. | | |

d)
|Feb. 1 |Zarcus, Capital |69,000 | | | |Goering, Capital* |14,250 | | | |Schmit, Capital** |23,750 | | | | Cash | |107,000 | | | To record withdrawal of Zarcus with bonus. | | |

* ($107,000 - $69,000) x 3/8
**($107,000 - $69,000) x 5/8

e)
|Feb. 1 |Zarcus, Capital |69,000 | | | |Accumulated Depreciation—Equipment |11,600 | | | | Goering, Capital* | |11,475 | | | Schmit, Capital** |...
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