FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Derek Howat, Gina Rosales, and Amin Karem formed a
revaluations to partnership assets are required before Derek’s withdrawal.
Before recording the year-end adjustments for salary, interest, and income, the individual capital accounts of the partners at December 31, 2020, were as follows:
|
Capital, Derek |
$155,000 |
|
Capital, Gina |
$215,000 |
|
Capital, Amin |
$130,000 |
HRK LLP had income for 2020 of $86,000 and according to the partnership agreement, profits should be split 2:3:1 between Derek, Gina, and Amin. A salary of $30,000 was paid to Derek during 2020, and interest is accrued on the opening capital balances at 5%.
Required:
- Calculate the December 31, 2020, capital balances of each partner prior to Derek’s retirement.
- Provide the necessary
journal entries to record the withdrawal of Derek from the partnership using thegoodwill method.
Provide the necessary journal entries to record the withdrawal of Derek from the partnership using the bonus method.
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