Question

Question 4

The balance sheet of the partnership of Ray, John and Tracy is presented below. They

share net income and losses equally.

                                                            RCT Partnership

                                                              Balance Sheet

                                                                 

                Cash                           $   5,000                 Accounts payable        $10,000

                Inventory                        80,000                 Ray, Capital                   20,000

                                                                                  John, Capital                  40,000

                                                               _                  Tracy, Capital                15,000

                    Total                      $   85,000                          Total                    $85,000

   Required:

   Prepare all necessary journal entries for each of the following independent situations.

1.         R, J and T agree to admit W. W purchases one-half of the equity interest of John           and pays John $20,000 cash personally.

2.         R, J and T agree to admit W to a one-half equity interest in the partnership if she invests $45,000 cash into the partnership. Refer to the original data.

3.         John wishes to retire. The partnership will pay John $30,000 for his equity.

           John really wants to retire. Refer to the original data.

Answer 1

Books of Parntnership of Ray , John and Tracy
Jounal Entries
Situation	Particulars	Dr. ($)	Cr. ($)
1	John's Capital A/c Dr.	20,000
	To W's Capital A/c		20,000
	( Being 50% Share of John Transferred to W )
2	Cash A/c Dr.	45,000
	To W's Capital A/c		45,000
	( Assuming: W is admitted as 50% partnership)
3	John's Capital A/c Dr.	40,000
	To Cash A/c		30,000
	To P&L A/c		10,000
	(Being John retired and paid in final settlement)