G. Allman, M. Jagger, and G. Harrison had a partnership which shared profits equ
ID: 2427878 • Letter: G
Question
G. Allman, M. Jagger, and G. Harrison had a partnership which shared profits equally. At the end of 2012, Harrison announced his intention to retire and withdraw from the partnership. Assets were revalued, and the capital accounts were adjusted. After adjustments, the balance sheet appeared as follows:
Assets
Liabilities & Owners’ Equity
Cash
$ 55,000
Accounts payable
$ 22,000
Inventory
33,000
Allman, capital
69,000
Land
101,000
Jagger, capital
56,000
Harrison, capital
42,000
Total assets
$189,000
Total liabilities & owners’ equity
$189,000
It was agreed that Harrison would take a cash payment for withdrawal at book value. How much cash did the partnership pay Harrison?
Assets
Liabilities & Owners’ Equity
Cash
$ 55,000
Accounts payable
$ 22,000
Inventory
33,000
Allman, capital
69,000
Land
101,000
Jagger, capital
56,000
Harrison, capital
42,000
Total assets
$189,000
Total liabilities & owners’ equity
$189,000
Explanation / Answer
The book value of a partner's interest is shown by the credit balance of the partner's capital account.The balance is computed after all profits or losses have been allocated in accordance with the partnership agreement, and the books closed. Now Harrison would take cash payment at book value so its equal to his credit balance.
Cash payment to Harrison= $42000
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