Question

PB2 LO15.4 The partnership of Arun, Margot, and Tammy has been doing well. Arun wants to retire and move to another state for a once-in-a-lifetime opportunity. The partners’ capital balances prior to Arun’s retirement are $60,000 each. Prepare a schedule showing how Arun’s withdrawal should be divided assuming his buyout is:

1. $70,000
2. $45,000
3. $60,000.

In addition, show the resulting entries to the capital accounts of each of the three.

Answer 1

Answer:

Schedule showing how Arun’s withdrawal should be divided assuming his buyout:

Particulars	Amount	Amount
Capital	= $ 60,000 * 3 = $ 1,80,000	$ 1,80,000
Less: Withdarw A capital		$ 45,000
Capital of new partnership arun	= $ 1,80,000 - $ 45,000 = $ 1,35,000	$ 1,35,000
Capital debit	= $ 1,35,000*1/3 = $ 1,35,000/3 = $ 45,000	$ 45,000
Total bonus of margot and tammy	= $ 60,000 - $ 45,000 = $ 15,000	$ 15,000

Note:

Withdraw of a partnership lead to dissolving the association and another partnership should be formed among the remaining partners. Another agreement must be made between the remaining partners.

Investment of the new partner isn't given being referred to that is the purpose applying trail strategy to show the bonus to partners considering Option that is B $ 45,000