Question

Please solve this whole 2nd part (a, b, and c). The first part was completed already, I have attached the screenshot of 1st part as well. Thanks!

Required information Problem 12-5A Partner withdrawal and admission LO P3, P4 (The following information applies to the questions displayed below. Meir, Benson, and Lau are partners and share income and loss in a 3:2:5 ratio (in percents: Meir, 30%; Benson, 20%, and Lau, 50%). The partnership's capital balances are as follows: Meir, $118,000; Benson, $79,000; and Lau, $203,000. Benson decides to withdraw from the partnership.

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And this is part 1 below (already completed):

Answer 1

Sol. 2 part (1.) Rhode brings capital of $133,333 for his 25% share:

Now as per the information in the question,

for 25% share Rhode brings Capital = $ 133,333

therefore the total capital of the firm would be taking the base of Rhode Share would be = $ 133,333 / 25%

i.e. = $ 533,332

Now since the question doesnot mention the new share of the other 3 partners we will assume that the new profit sharing ratio would be equal for all the 4 partners, i.e. 1:1:1:1 between Meir, Benson, Lau & Rhode.

Therefore the fresh capital of all the partners should be $ 133,333. Therefore for those partners whose capital is short of this amount will have to introduce capital and for those who have invested extra capital than $ 133,333 will be allowed to withdraw their extra invested amount.

The calculations are as follows:

For Meir = Fresh Capital - Existing Capital

= $ 133,333 - $ 118,000

= $ 15,667 (introduction of capital)

For Benson = Fresh Capital - Existing Capital

= $ 133,333 - $ 79,000

= $ 54,333 (introduction of capital)

For Lau = Fresh Capital Existing Capital

= $ 133,333 - $ 203,000

= $ 69,667 (withdrawal of capital)

Now Journal Entries will be as follows:

Transaction	Particulars	Debit	Credit
1	Cash/Bank	133,333
	To Rhode Capital		133,333
	(being Cash introduced by the new partner Rhode)
2	Cash/Bank	15,667
	To Meir Capital		15,667
	(being Cash introduced by the existing partner.)
3	Lau Capital	69667
	To Cash/Bank		69667
	(being capital amount withdrawn)
4	Cash/Bank	54,333
	To Benson Capital		54,333
	(being Cash introduced by the existing partner.)

Sol. 2 part (2.) Rhode brings capital of $97,333 for his 25% share:

The procedure will be the same as solved in the above part, therefore we will do the solution only.

The total capital of the partnership firm will be = $ 97,333 / 25%

= $ 389,332

Therefore the fresh capital of all the partners should be $ 97,333. Therefore for those partners whose capital is short of this amount will have to introduce capital and for those who have invested extra capital than $ 97,333 will be allowed to withdraw their extra invested amount.

The calculations are as follows:

For Meir = Fresh Capital - Existing Capital

= $ 97,333 - $ 118,000

= $ 20,667(withdrawal of capital)

For Benson = Fresh Capital - Existing Capital

= $ 97,333 - $ 79,000

= $ 18,333 (introduction of capital)

For Lau = Fresh Capital Existing Capital

= $ 97,333 - $ 203,000

= $ 105,667 (withdrawal of capital)

Now Journal Entries will be as follows:

Transaction	Particulars	Debit	Credit
1	Cash/Bank	97,333
	To Rhode Capital		97,333
	(being Cash introduced by the new partner Rhode)
2	Meir Capital	20,667
	To Cash/Bank		20,667
	(being capital amount withdrawn)
3	Lau Capital	105,667
	To Cash/Bank		105,667
	(being capital amount withdrawn)
4	Cash/Bank	18,333
	To Benson Capital		18,333
	(being Cash introduced by the existing partner.)

Sol. 2 part (3.) Rhode brings capital of $ 174,666 for his 25% share:

The procedure will be the same as solved in the above part, therefore we will do the solution only.

The total capital of the partnership firm will be = $ 174,666 / 25%

= $ 698,664

Therefore the fresh capital of all the partners should be $ 174,666. Therefore for those partners whose capital is short of this amount will have to introduce capital and for those who have invested extra capital than $ 174,666 will be allowed to withdraw their extra invested amount.

The calculations are as follows:

For Meir = Fresh Capital - Existing Capital

= $ 174,666 - $ 118,000

= $ 56,666 (introduction of capital)

For Benson = Fresh Capital - Existing Capital

= $ 174,666 - $ 79,000

= $ 95,666 (introduction of capital)

For Lau = Fresh Capital Existing Capital

= $ 174,666 - $ 203,000

= $ 28,334 (withdrawal of capital)

Now Journal Entries will be as follows:

Transaction	Particulars	Debit	Credit
1	Cash/Bank	174,666
	To Rhode Capital		174,666
	(being Cash introduced by the new partner Rhode)
2	Cash/Bank	56,666
	To Meir Capital		56,666
	(being Cash introduced by the existing partner.)
3	Lau Capital	28,334
	To Cash/Bank		28,334
	(being capital amount withdrawn)
4	Cash/Bank	95,666
	To Benson Capital		95,666
	(being Cash introduced by the existing partner.)