Problem 1

The capital accounts of A, B, C and D on May 31, 2014 were as follows:

A
B
C
D

60,000
80,000
70,000
40,000

(20%
(20%
(20%
(20%

share)
share)
share)
share)

On May 31, 2014, the following transactions occurred:

a. C retired from the partnership and was paid by the partnership 50,000 cash in full
settlement of his interest
b. E was admitted to the new partnership with a 20,000 cash investment for 10% interest
in net assets
Required: Prepare the necessary entries to record the above transactions on May 31, 2014.
Problem 2
A, B and C are partners sharing profits in the ratio of 3:3:2 respectively. Investments are 600,000,
400,000 and 300,000 for A, B and C respectively. The partners agree to admit D on the following
basis: D is to pay A 400,000 for 50% of As interest; D is to invest 300,000 in the business. The
total capital of the partnership is to be 2,000,000, of which Ds interest is to be 500,000 upon
admission
Required: Prepare the entries to record Ds admission
Problem 3
On July 10,2014, partner C decided to withdraw from A, B & C Partnership. Their profit and loss
ratio is 3:2:1 respectively. Partnership assets are to be used to acquire Cs interest.
As of July 10, 2014, the capital accounts of the partners are as follows: A, 120,000; B, 60,000;
and C, 50,000. C accepted cash of 40,500 and equipment with a current fair value of 9,000. The
equipment had a cost of 30,000 and was 60% depreciated.
Required: Prepare the entries to record Cs withdrawal
Problem 4
Partners A, B, C and D share profits of 40%, 30%, 15% and 15% respectively. Their partnership
agreement provides that in the event of the death of a partner, the firm shall continue until the
end of the fiscal period. Profits shall be considered to have been earned proportionately during
this period, and the deceased partners capital shall be adjusted by the proper share of the profit
or loss until the date of death. From that date until the date of settlement with the estate, there
shall be added interest at 6% compounded on the adjusted capital. The remaining partners shall
continue to share profits in the old ratio. Payment to the estate shall be made within one year
from date of partners death. Partner D died on November 16. On December 31, the end of a 6month period, account balances on the partnership books before the income summary account is
closed are as follows:
Cash
7,500
Accounts Receivable
70,000
Inventories
95,000
Machinery and Equipment
45,000
37,500
Furniture and Fixtures
16,500

Notes Payable
Accounts Payable
A, Capital
B, Capital
C, Capital

15,000
70,500
42,000

24,000

D, Capital
22,500
Income Summary (7/1 to 12/31) 22,500
The income summary account is closed on December 31. On this date, C indicates to the
remaining partners that he wishes to retire and is willing to accept in settlement of his interest
the balance in his capital account after distribution of profits, less 20%. A and B accept his offer
and issue a partnership 60-day, 6% note to C in payment of his interest.
Required: Prepare all necessary journal entries as of December 31.