D, E and F are partners sharing profits and losses in the ratio 5:3:2, respectively. The December 31, 2019 balance sheet of the partnership before any profit allocation is summarized as follows: ASSETS: Cash 90,000 Inventories 40,000 Furniture & fixtures – net 50,000 Patent 15,000 Total assets 195,000 LIABILITIES AND CAPITAL: Accounts payable 4,000 Loan from F 3,000 D, capital 70,000 E, capital 60,000 F, capital 30,000 F, drawings (2,000) Income summary 30,000 Total liabilities and capital 195,000 On January 1, 2020, F has decided to retire from the partnership and by mutual agreement among the partners, the following have been arrived at: Inventories amounting to 5,000 is considered obsolete and must be written off. Furniture and fixture should be adjusted to its current value of 65,000. The patent is considered worthless and must be written off immediately before the retirement of F. It was agreed that the partnership will pay F for his interest in the partnership inclusive of loan balance. Requirements: Compute for the interest of F before his retirement. If F retires by receiving 36,000 cash, compute for the capital balances of D and E after the retirement of F. If F retires by receiving 38,000 cash, compute for the capital balances of D and E after F’s retirement.
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.
- D, E and F are partners sharing
profits and losses in the ratio 5:3:2, respectively. The December 31, 2019balance sheet of thepartnership before any profit allocation is summarized as follows:
|
ASSETS: |
|
|
Cash |
90,000 |
|
Inventories |
40,000 |
|
Furniture & fixtures – net |
50,000 |
|
Patent |
15,000 |
|
Total assets |
195,000 |
|
LIABILITIES AND CAPITAL: |
|
|
Accounts payable |
4,000 |
|
Loan from F |
3,000 |
|
D, capital |
70,000 |
|
E, capital |
60,000 |
|
F, capital |
30,000 |
|
F, drawings |
(2,000) |
|
Income summary |
30,000 |
|
Total liabilities and capital |
195,000 |
On January 1, 2020, F has decided to retire from the partnership and by mutual agreement among the partners, the following have been arrived at:
- Inventories amounting to 5,000 is considered obsolete and must be written off.
- Furniture and fixture should be adjusted to its current value of 65,000.
- The patent is considered worthless and must be written off immediately before the retirement of F.
It was agreed that the partnership will pay F for his interest in the partnership inclusive of loan balance.
Requirements:
- Compute for the interest of F before his retirement.
- If F retires by receiving 36,000 cash, compute for the capital balances of D and E after the retirement of F.
- If F retires by receiving 38,000 cash, compute for the
capital balances of D and E after F’s retirement.
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