Question

Withdrawal of Partner

Lane Stevens is to retire from the partnership of Stevens and Associates as of March 31, the end of the current fiscal year. After closing the accounts, the capital balances of the partners are as follows: Lane Stevens, $337,000; Cherrie Ford, $172,000; and LaMarcus Rollins, $192,000. They have shared net income and net losses in the ratio of 3:2:2. The partners agree that the merchandise inventory should be increased by $31,400, and the allowance for doubtful accounts should be increased by $7,600. Stevens agrees to accept a note for $275,000 in partial settlement of his ownership equity. The remainder of his claim is to be paid in cash. Ford and Rollins are to share equally in the net income or net loss of the new partnership.

a. Journalize the entry to record the adjustment of the assets to bring them into agreement with current market prices. For a compound transaction, if an amount box does not require an entry, leave it blank.

	Merchandise Inventory
	Allowance for Doubtful Accounts
	Lane Stevens, Capital
	Cherrie Ford, Capital
	LaMarcus Rollins, Capital

b. Journalize the entry to record the withdrawal of Stevens from the partnership. For a compound transaction, if an amount box does not require an entry, leave it blank.

	Lane Stevens, Capital
	Cash
	Notes Payable

Answer 1

Answer:

Req A:
Journal Entries for Adjustment of Assets
Date	Account and explanation	debit($)	credit($)
	Merchandise Inventory	$31,400
	Revaluation Account		$31,400
	(To record the merchandise inventory should be increased by)
	Revaluation Account	$7,600
	Allowance for Doubtful debts		$7,600
	(To record the allowance for doubtful accounts should be increased by)
	Revaluation Account ($31,400-$7,600)	$23,800
	Lane Stevens Capital		$10,200
	Cherrie Ford Capital		$6,800
	La Marcus Ford Capital		$6,800
	(To record allocation of RevalutionAccount To partnerin 3:2:2)

Req B:
Journal Entries To record of Stevens Withdrawal
Date	Account and explanation	debit($)	credit($)
	Lane Stevens Capital ($337,000+$10,200)	$347,200
	Note Payable		$275,000
	Cash Account		$72,200
	(To recordTo record of Stevens Withdrawa)