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, $150,000; Folgers, $90,000; and Tulip, $60,000.

Prepare journal entries to record the retirement of Tulip under the independent assumption.

Assume Tulip is paid; (a) $60,000, (b) $80,000, and (c) $30,000 for her equity using partnership cash. (Do not round intermediate calculations.)

Question

Evangeline

Business

4 September, 16:00

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, $150,000; Folgers, $90,000; and Tulip, $60,000.

Prepare journal entries to record the retirement of Tulip under the independent assumption.

Assume Tulip is paid; (a) $60,000, (b) $80,000, and (c) $30,000 for her equity using partnership cash. (Do not round intermediate calculations.)

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Answers (1)

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Elvis Hicks · Answer 1

a Debit Capital $60,000

Credit Tulip's Bank Account $60,000

b

Debit Capital $60,000

Debit P&L $20,000

Credit Tulip's Bank Account $80,000

c

Debit Capital $60,000

Credit P&L $30,000

Credit Tulip's Bank Account $30,000

Explanation:

Depending on partnership agreement of the partners, one way to treat Tulip's exit from the business is what i described, it could be treated that whatever shortfall in capital paid to Tulip or the excess paid is shared among the remaining partners in their agreed profit sharing ratio