hunter, folgers, and tulip have been partners while sharing net income and loss in a 5:3:2 ratio (in…

hunter, folgers, and tulip have been partners while sharing net income and loss in a 5:3:2 ratio (in percents: hunter, 50%; folgers, 30%; and tulip, 20%). on january 31, the date tulip retires from the partnership, the equities of the partners are hunter, $370,000; folgers, $259,000; and tulip, $185,000. prepare journal entries to record the retirement of tulip under the following independent assumptions. assume tulip is paid $185,000, $205,000, $155,000 for her equity using partnership cash. note: do not round intermediate calculations. round final answers to the nearest whole dollar. view transaction list journal entry worksheet 1 2 3 record the retirement of tulip on the assumption that she is paid for her equity using partnership cash of $185,000. note: enter debits before credits. transaction general journal debit credit (a)

hunter, folgers, and tulip have been partners while sharing net income and loss in a 5:3:2 ratio (in percents: hunter, 50%; folgers, 30%; and tulip, 20%). on january 31, the date tulip retires from the partnership, the equities of the partners are hunter, $370,000; folgers, $259,000; and tulip, $185,000. prepare journal entries to record the retirement of tulip under the following independent assumptions. assume tulip is paid $185,000, $205,000, $155,000 for her equity using partnership cash. note: do not round intermediate calculations. round final answers to the nearest whole dollar. view transaction list journal entry worksheet 1 2 3 record the retirement of tulip on the assumption that she is paid for her equity using partnership cash of $185,000. note: enter debits before credits. transaction general journal debit credit (a)

Answer

Explanation:

Step1: Record entry when paid - equal to equity

When Tulip is paid $185,000 which is equal to her equity, we simply remove her capital balance from the books.

Transaction General Journal Debit Credit
(a) Tulip, Capital $185,000
Cash $185,000

Step2: Record entry when paid - more than equity

When Tulip is paid $205,000 which is more than her equity of $185,000, the $20,000 excess is a bonus to Tulip. This bonus is deducted from the remaining partners' capital accounts in their profit - sharing ratio. The remaining partners' ratio is 5:3 for Hunter and Folgers. The sum of the ratio parts is 5 + 3=8. Hunter's share of the bonus = $20,000×\frac{5}{8}=$12,500 Folgers' share of the bonus = $20,000×\frac{3}{8} = $7,500

Transaction General Journal Debit Credit
(b) Tulip, Capital $185,000
Hunter, Capital $12,500
Folgers, Capital $7,500
Cash $205,000

Step3: Record entry when paid - less than equity

When Tulip is paid $155,000 which is less than her equity of $185,000, the $30,000 difference is a bonus to the remaining partners. This bonus is added to the remaining partners' capital accounts in their profit - sharing ratio. Hunter's share of the bonus = $30,000×\frac{5}{8} = $18,750 Folgers' share of the bonus = $30,000×\frac{3}{8}=$11,250

Transaction General Journal Debit Credit
(c) Tulip, Capital $185,000
Cash $155,000
Hunter, Capital $18,750
Folgers, Capital $11,250

Answer:

Transaction General Journal Debit Credit
(a) Tulip, Capital $185,000
Cash $185,000
(b) Tulip, Capital $185,000
Hunter, Capital $12,500
Folgers, Capital $7,500
Cash $205,000
(c) Tulip, Capital $185,000
Cash $155,000
Hunter, Capital $18,750
Folgers, Capital $11,250