A partnership of attorneys in the st louis missouri area

Reference no: EM13376700

A partnership of attorneys in the St. Louis, Missouri, area has the following balance sheet accountsas of January 1, 2013:

Assets . . . . . . . . . . . . . . . . . $320,000 Liabilities . . . . . . . . . . . . . . . . . $120,000

Athos, capital . . . . . . . . . . . . . 80,000

Porthos, capital . . . . . . . . .. . . 70,000

Aramis, capital . . . . . . . . . . .. . 50,000

According to the articles of partnership, Athos is to receive an allocation of 50 percent ofall 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 offair value.

For each of the following independent situations, prepare the journal entry or entries to berecorded by the partnership. (Round to nearest dollar.)

a. Porthos, with permission of the other partners, decides to sell half of his partnership interestto D'Artagnan for $50,000 in cash. No asset revaluation or goodwill is to be recordedby the partnership.

b. All three of the present partners agree to sell 10 percent of each partnership interest toD'Artagnan for a total cash payment of $25,000. Each partner receives a negotiated portionof this amount. Goodwill is recorded as a result of the transaction.

c. D'Artagnan is allowed to become a partner with a 10 percent ownership interest by contributing$30,000 in cash directly into the business. The bonus method is used to record thisadmission.

d. Use the same facts as in requirement (c) except that the entrance into the partnership isrecorded by the goodwill method.

e. D'Artagnan is allowed to become a partner with a 10 percent ownership interest by contributing$12,222 in cash directly to the business. The goodwill method is used to recordthis transaction.

f. Aramis decides to retire and leave the partnership. An independent appraisal of the businessand its assets indicates a current fair value of $280,000. Goodwill is to be recorded.

Aramis will then be given the exact amount of cash that will close out his capital account.

Reference no: EM13376700

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