A partnership of attorneys in the St. Louis, Missouri, area has the following balance sheet accounts as

Question:

A partnership of attorneys in the St. Louis, Missouri, area has the following balance sheet accounts as of January 1, 2018:
Assets . . . . . . . . . . . . $320,000
Liabilities . . . . . . . . . . $120,000
Athos, capital . . . . . . . . . 80,000
Porthos, capital . . . . . . . . 70,000
Aramis, capital . . . . . . . . 50,000
According to the articles of partnership, Athos is to receive an allocation of 50 percent of all partnership profits and losses while Porthos receives 30 percent and Aramis, 20 percent. The book value of each asset and liability should be considered an accurate representation of fair value.
For each of the following independent situations, prepare the journal entry or entries to be recorded by the partnership. (Round to nearest dollar.)
a. Porthos, with permission of the other partners, decides to sell half of his partnership interest to D'Artagnan for $50,000 in cash. No asset revaluation or goodwill is to be recorded by the partnership.
b.
All three of the present partners agree to sell 10 percent of each partnership interest to D'Artagnan for a total cash payment of $25,000. Each partner receives a negotiated portion of this amount. Goodwill is recorded as a result of the transaction.
c. D'Artagnan is allowed to become a partner with a 10 percent ownership interest by contributing $30,000 in cash directly into the business. The bonus method is used to record this admission.
d. Use the same facts as in requirement (c) except that the entrance into the partnership is recorded by the goodwill method.
e. D'Artagnan is allowed to become a partner with a 10 percent ownership interest by contributing $12,222 in cash directly to the business. The goodwill method is used to record this transaction.
f. Aramis decides to retire and leave the partnership. An independent appraisal of the business and its assets indicates a current fair value of $280,000. Goodwill is to be recorded. Aramis will then be given the exact amount of cash that will close out his capital account.
Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Advanced Accounting

ISBN: 978-1259444951

13th edition

Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupni

Question Posted: