Question

A partnership of attorneys in the St. Louis, Missouri, area has the following balance sheet accounts as of January 1, 2018:

Assets	$	474,000	Liabilities	$	142,000
			Athos, capital		124,000
			Porthos, capital		114,000
			Aramis, capital		94,000

According to the articles of partnership, Athos is to receive an allocation of 50 percent of all partnership profits and losses while Porthos receives 30 percent and Aramis, 20 percent. The book value of each asset and liability should be considered an accurate representation of fair value.

For each of the following independent situations, prepare the journal entry or entries to be recorded by the partnership.

1. Porthos, with permission of the other partners, decides to sell half of his partnership interest to D’Artagnan for $82,000 in cash. No asset revaluation or goodwill is to be recorded by the partnership.

2. All three of the present partners agree to sell 10 percent of each partnership interest to D'Artagnan for a total cash payment of $40,000. Each partner receives a negotiated portion of this amount. Goodwill is recorded as a result of the transaction.

3. D'Artagnan is allowed to become a partner with a 10 percent ownership interest by contributing $64,000 in cash directly into the business. The bonus method is used to record this admission.

4. Use the same facts as in requirement (c) except that the entrance into the partnership is recorded by the goodwill method.

5. D'Artagnan is allowed to become a partner with a 15 percent ownership interest by contributing $54,000 in cash directly to the business. The goodwill method is used to record this transaction.

6. Aramis decides to retire and leave the partnership. An independent appraisal of the business and its assets indicates a current fair value of $406,000. Goodwill is to be recorded. Aramis will then be given the exact amount of cash that will close out his capital account.

Answer 1

s.no.	general journal	debit	credit
a	porthos capital (114000/2)	57000
	to D’Artagnan capital		57000
	(being transfer of interest from porthos capital to D’Artagnan capital recorded)
s.no	general journal	debit	credit
b	goodwill	*68000		* implied value of partnership = 40000/10% = 400000
	to athos		34000	current capital	332000
	to porthos		20400	goodwill	=	400000-332000	68000
	to D’Artagnan		13600	goodwill of 68000 to allocated to partners in their profit and loss sharin ratio.
	(goodwill transferred to partners in their profit and loss sharing ratio)
	athos capital(124000+34000)*10%	15800
	porthos capotal(114000+20400)*10%	13440
	aramis capital(94000+13600)*10%	10760
	to D’Artagnan capital		40000
	(transfer of the interest of 10% of the capital of each partner to D’Artagnan )
s.no	general journal	debit	credit
c	cash	64000
	to D’Artagnan capital(124000+114000+94000+64000)*10%		39600
	to athos capital(64000-39600)*50%		12200
	to porthos capital(24400*30%)		7320
	to aramis capital(24400*20%)		4880
	(to record cash received from D’Artagnan and bonus distributed to old partners in their profit sharing ratio()
d	cash	64000			implied capital	64000/10%	640000
	goodwill(640000-332000-64000)	244000			current capital		332000
	to D’Artagnan capital		64000		cash brought in		64000
	to athos capital		122000		goodwill		244000
	to porthos capital		73200
	to aramis capital		48800
	( to record cash received by a new partner and distributed the goodwill to the old partners in their profit sharing ratio)
e	cash	54000			implied capital	54000/15%	360000
	goodwill (26000*15%)	3900			current		332000
	to D’Artagnan capital		57900		cash brought in		54000
	(to record investment by D’Artagnan )				goodwill	(386000-360000)	26000
f	goodwill(406000-332000)	74000
	to athos capital(50%)		37000
	to porthos capital(30%)		22200
	to aramis capital(20%)		14800
	( to record excess goodwill to the old partners)
	aramis capital (94000+14800)	108800
	to cash		108800
	( cash paid to outgoing partner)

HOPE THIS WAS HELPFUL. DO CONSIDER GIVING THIS A THUMPS UP.