Question

The partnership of Ace, Jack, and Spade has been in business for 25 years. On December 31, 20X5, Spade decided to retire. The partnership balance sheet reported the following capital balances for each partner at December 31, 20X5: Ace, Capital $150,000 Jack, Capital 200,000 Spade, Capital 120,000 The partners allocate partnership income and loss in the ratio 20:30:50, respectively. PLEASE SHOW ME HOW TO DO IT STEP BY STEP r 10-13: DISSOChLon ( SUI MURA!!) Use the information provided in P15-15 to answer the following revised questions. Make an entry (or entries) to record Spade's withdrawal under each of the following independent situations. Jounal Entry (or Entries) a. Jack acquired Spade's capital interest for $140,000 in a personal transaction. Partnership assets were not revalued and no goodwill was recognized b. Assume the same facts as in "a" except that Spade received $140,000 cash from the partnership. Capital of the partnership after Spade's retirement was $330,000. c. Spade received $150,000 of cash from the partnership upon retirement. The partnership recorded goodwill attributable to all partners. d. Spade received $140,000 cash from the partnership upon retirement. The bonus method was used after $10,000 revaluation of a piece of land.

Answer 1

In this question, we have to record the journal entries.

Partnership Ratio is given in the question i.e Ace: 20, Jack: 30, Spade: 50

Note: These all situations are independent.

Now, we will proceed with part a.

a) Spade capital interest was acquired in a personal transaction with Jack.

Here is our first Journal entry i.e. Debit Credit

Spade, Capital A/c Debit	120000
Jack, Capital A/c Credit		120000

Spade has maximum Capital of $120,000

b) Business was recognized by the partners

Goodwill A/c Debit (Working Note)	40000
Ace, Capital A/c (40,000 * 20%)		8000
Jack, Capital A/c (40,000 * 30%)		12,000
Spade, Capital A/c (40,000 * 50%)		20,000

Working Note:-

Amount paid by Jack for Spade's Capital

Interest $140,000

Recorded Amount of Spade's Capital ($120,000)

Goodwill for Spade $20,000

Spade has 50% share in the Partnership firm

Partnership's Goodwill will be ($20,000/50%) = $40,000

$40,000 will be Allocated to Partners in the ratio of 20:30:50

Spade, Capital A/c Debit (120,000 + 20,000)	140,000
Jack, Capital A/c Credit		140,000

Capital of the partnership after Spade's retirement was $330,000

Amount paid to spade upon retirement $140,000

Spade's Capital    ($120,000)

Amount Paid $20,000

$20,000 (This amount is distributed to Ace and Jack in the ratio of 40:60

Spade, Capital A/c Debit	120,000
Ace, Capital A/c (20,000 * 40%)	8,000
Jack, Capital A/c (20,000 * 60%)	12,000
Cash A/c Credit		140,000

Capital Balance after Retirement:

Ace, Capital (150,000 - 8,000) = $ 142,000

Jack, Capital (200,000- 12,000) = $ 188,000

Total capital   = $ 330,000

c) Spade was given $150,000 upon the retirement and goodwill applicable to the all the partners.

Amount paid to Spade $150,000

Spade Capital interest ($120,000)

Goodwill to Spade $30,000

Spade has 50% share in the Partnership firm

Partnership's Goodwill will be ($30,000/50%) = $60,000

$60,000 will be distributed in the ratio of 20:30:50

Goodwill A/c Debit	60,000
Ace, Capital A/c (60,000 * 20%)		12,000
Jack, Capital A/c (60,000 * 30%)		18,000
Spade, Capital A/c (60,000 * 50%)		30,000

Spade, Capital A/c Debit	150,000
Cash A/c Credit		150,000

Thanks...