In the LMK partnership, Luis's capital is $40,000, Marty's is $50,000, and Karl's is $30,000. They share income in a 4:1:1 ratio, respectively. Karl is retiring from the partnership.
Prepare journal entries to record Karl's withdrawal according to each of the following independent assumptions:
a. Karl is paid $38,000, and no goodwill is recorded.
b. Karl is paid $42,000, and only his share of the goodwill is recorded.
c. Karl is paid $35,000, and all implied goodwill is recorded.
d. Prepare a one-paragraph note summarizing the guidance the UPA 1997 offers on computing the buyout price for a partner who is retiring from the partnership.