Partner Retirement: Various Cases The capital balances for the partnership of Diaz, Isidro, and Nelson are as follows: Capital-Diaz Capital-Isidro Capital-Nelson $1,500,000 900,000 600,000 The partners share income in a 2:4:4 ratio. Nelson decides to retire. Diaz and Isidro continue the partnership, sharing income in a 2:4 (1:2) ratio. Required Prepare the journal entry or entries to record the retirement of Nelson in each of the following scenarios: a. Diaz and Isidro use their personal assets to buy Nelson's interest for $800,000. Description Debit Credit Capital-Isidro b. The partners agree to pay Nelson $750,000 of partnership cash. The bonus method is used. Capital-Diaz Description To record retirement bonus to Nelson. Debit Credit To record retirement payment to Nelson. c. Same as b., but the partial goodwill approach is used. Description Debit Credit To record partial goodwill. To record retirement payment to Nelson. d. Same as b., but the total goodwill approach is used. Description Capital-Diaz Capital-Isidro To record total goodwill. Debit Credit To record retirement payment to Nelson. e. The partners agree to pay Nelson $450,000 of partnership cash. The difference is attributed to overvalued plant and equipment, and the total goodwill approach is used. Description Debit Capital-Diaz Credit Capital-Isidro To record difference attributed to overvalued land. To record retirement payment to Nelson.
Partner Retirement: Various Cases The capital balances for the partnership of Diaz, Isidro, and Nelson are as follows: Capital-Diaz Capital-Isidro Capital-Nelson $1,500,000 900,000 600,000 The partners share income in a 2:4:4 ratio. Nelson decides to retire. Diaz and Isidro continue the partnership, sharing income in a 2:4 (1:2) ratio. Required Prepare the journal entry or entries to record the retirement of Nelson in each of the following scenarios: a. Diaz and Isidro use their personal assets to buy Nelson's interest for $800,000. Description Debit Credit Capital-Isidro b. The partners agree to pay Nelson $750,000 of partnership cash. The bonus method is used. Capital-Diaz Description To record retirement bonus to Nelson. Debit Credit To record retirement payment to Nelson. c. Same as b., but the partial goodwill approach is used. Description Debit Credit To record partial goodwill. To record retirement payment to Nelson. d. Same as b., but the total goodwill approach is used. Description Capital-Diaz Capital-Isidro To record total goodwill. Debit Credit To record retirement payment to Nelson. e. The partners agree to pay Nelson $450,000 of partnership cash. The difference is attributed to overvalued plant and equipment, and the total goodwill approach is used. Description Debit Capital-Diaz Credit Capital-Isidro To record difference attributed to overvalued land. To record retirement payment to Nelson.
Chapter15: Partnership Accounting
Section: Chapter Questions
Problem 1PB: The partnership of Magda and Sue shares profits and losses in a 50:50 ratio after Mary receives a...
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Transcribed Image Text:Partner Retirement: Various Cases
The capital balances for the partnership of Diaz, Isidro, and Nelson are as follows:
Capital-Diaz
Capital-Isidro
Capital-Nelson
$1,500,000
900,000
600,000
The partners share income in a 2:4:4 ratio. Nelson decides to retire. Diaz and Isidro continue the partnership, sharing income in a 2:4 (1:2) ratio.
Required
Prepare the journal entry or entries to record the retirement of Nelson in each of the following scenarios:
a. Diaz and Isidro use their personal assets to buy Nelson's interest for $800,000.
Description
Debit
Credit
Capital-Isidro
b. The partners agree to pay Nelson $750,000 of partnership cash. The bonus method is used.
Capital-Diaz
Description
To record retirement bonus to Nelson.
Debit
Credit
To record retirement payment to Nelson.
c. Same as b., but the partial goodwill approach is used.
Description
Debit
Credit
To record partial goodwill.
To record retirement payment to Nelson.
d. Same as b., but the total goodwill approach is used.
Description
Capital-Diaz
Capital-Isidro
To record total goodwill.
Debit
Credit
To record retirement payment to Nelson.
e. The partners agree to pay Nelson $450,000 of partnership cash. The difference is attributed to overvalued plant and equipment, and the total goodwill approach is used.
Description
Debit
Capital-Diaz
Credit
Capital-Isidro
To record difference attributed to overvalued land.
To record retirement payment to Nelson.
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