E 16-14 Partnership retirement—Revaluation and bonus approaches The capital account balances and profit- and loss-sharing ratios of the Byd, Box, Dar, and Fus partnership on December 31, 2016, after closing entries are as follows: Byd (30%) $30,000 Box (20%) 25,000 Dar (40%) 25,000 Fus (10%) 20,000 Total capital $100,000 Box is retiring from the partnership, and the partners agree that he will receive a cash payment of $35,000 in final settlement of his interest. The book values of partnership assets and liabilities are equal to fair values, except for a building with a book value of $15,000 and a fair value of $25,000. Required Prepare the journal entry or entries to record Box’s retirement assuming that assets are revalued to the basis implied by the excess payment to Box. Prepare the journal entry or entries to record Box’s retirement assuming the bonus approach is used.
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.
E 16-14 Partnership retirement—Revaluation and bonus approaches
The capital account balances and profit- and loss-sharing ratios of the Byd, Box, Dar, and Fus partnership on December 31, 2016, after closing entries are as follows:
|
Byd (30%) |
$30,000 |
|
Box (20%) |
25,000 |
|
Dar (40%) |
25,000 |
|
Fus (10%) |
20,000 |
|
Total capital |
$100,000 |
Box is retiring from the partnership, and the partners agree that he will receive a cash payment of $35,000 in final settlement of his interest. The book values of partnership assets and liabilities are equal to fair values, except for a building with a book value of $15,000 and a fair value of $25,000.
Required
-
Prepare the
journal entry or entries to record Box’s retirement assuming that assets are revalued to the basis implied by the excess payment to Box. -
Prepare the journal entry or entries to record Box’s retirement assuming the bonus approach is used.
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