Part 1. Gibbs, Hook, and Chan are partners and share income and loss in a 5:1:4 ratio (in percents: Gibbs, 50%; Hook, 10%; and Chan, 40%). The partnership’s capital balances are as follows: Gibbs, $606,000; Hook, $148,000; and Chan, $446,000. Gibbs decides to withdraw from the partnership. Prepare journal entries to record Gibbs’s April 30 withdrawal under each separate assumption: a. Gibbs sells her interest to Brady for $250,000 after Brady is approved as a partner. b. Gibbs gives her interest to a daughter-in-law, Kannon, and Kannon is approved as a partner. c. Gibbs is paid $606,000 in partnership cash for her equity. d. Gibbs is paid $350,000 in partnership cash for her equity. e. Gibbs is paid $200,000 in partnership cash plus manufacturing equipment recorded on the partnership books at $538,000 less its accumulated depreciation of $336,000. Part 2. Assume that Gibbs does not retire from the partnership described in part 1. Instead, Chip is admitted to the partnership on April 30 with a 20% equity. Prepare journal entries to record the entry of Chip under each separate assumption: Chip invests (a) $300,000; (b) $196,000; and (c) $426,000.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Part 1. Gibbs, Hook, and Chan are partners and share income and loss in a 5:1:4 ratio (in percents: Gibbs,
50%; Hook, 10%; and Chan, 40%). The
Hook, $148,000; and Chan, $446,000. Gibbs decides to withdraw from the partnership. Prepare
entries
a. Gibbs sells her interest to Brady for $250,000 after Brady is approved as a partner.
b. Gibbs gives her interest to a daughter-in-law, Kannon, and Kannon is approved as a partner.
c. Gibbs is paid $606,000 in partnership cash for her equity.
d. Gibbs is paid $350,000 in partnership cash for her equity.
e. Gibbs is paid $200,000 in partnership cash plus manufacturing equipment recorded on the partnership
books at $538,000 less its
Part 2. Assume that Gibbs does not retire from the partnership described in part 1. Instead, Chip is admitted
to the partnership on April 30 with a 20% equity. Prepare journal entries to record the entry of Chip
under each separate assumption: Chip invests (a) $300,000; (b) $196,000; and (c) $426,000.
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