Question

At year-end, the Circle City partnership has the following capital balances: Manning, Capital $ 380,000

Gonzalez, Capital 360,000

Clark, Capital 330,000

Freeney, Capital 320,000 Profits and losses are split on a 3:3:2:2 basis, respectively. Clark decides to leave the partnership and is paid $360,000 from the business based on the original contractual agreement.

The payment made to Clark beyond his capital account was for Clark's share of previously unrecognized goodwill. After recognizing partnership goodwill, what is Manning’s capital balance after Clark withdraws?

Answer 1

Journal entry for clark retirement
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Clark's capital			3,30,000
	Manning capital (30,000*3/8)		11,250
	Gonzalez capital (30,000*3/8)		11250
	Freeney capital account (30000*2/8)	7500
	Cash account				360000.00
	(for capital paid off and excess addjusted from remaning partners)
The Capital of Manning after retirement of Clark:
Beginning baalnce before retirement	3,80,000
Less: Share of Goodwill borne by Manning	11,250
Capital balance of Manning after retirement	3,68,750
Answer is $368,750