AC Partnership had the following linformation on January 1\", 201s Profit $60,00

Question

AC Partnership had the following linformation on January 1", 201s Profit $60,000 On that date, Partner C decided to withdraw from the partnership. Answer the following Independen cases 19. Assume that Partner B uses $22,000 of her personal funds to purchase Partner C's interest in the partnership in a private transaction. How would this transaction be recorded by the partnership a. Debit B-Capital $22,000, Credit C-Capital $22,000. b. Debit C-capital S22.000, credit B-Capital S22.000. c. Debit B-Capital $30,000, Credit C-Capital $30,000. d. Debit C-Capital $30,000, Credit B-Capital $30,000. 20. Assume that Partner C sells her recorded using the bonus method? interest to the partnership for $25,000. How would this transaction be a. Debit C-Capital $30,000, Credit A-Capital $20,000, Credit B-Capital $10,000. b. Debit C-Capital $30,000, Credit Cash $25,000, Credit A-Capital $2,500, Credit B-Capital $2,500. d. Debit c Capital 30,000, redit -aital $15,000 Credit B Capital $15,000 21. Assume that Partner C sells her interest to the Partnership for $32,000. Using the goodwill method, what would be the goodwill traceable to the entire Partnership and Partner A's share of that goodwill, respectively? a. b. C. d. e. Entire Partnership A's Share $3,200 $4,000 $5,000 $8,000 $10,000 $10,000 $2,000 $8,000 $800 $4,000 End of Three Items

Explanation / Answer

Solution 19:

If partner B uses $22,000 of his personal fund to purchase partner C interest in partnership in a private transaction then entry to record by partneshi is

"Debit C capital $30,000, Credit B capital $30,000"

Hence option d is correct.

Solution 20:

C capital balance before retirement = $30,000

Settlement amount paid to C = $25,000

Remaining capital balance of C = $30,000 - $25,000 = $5,000

This bonus capital will be distributed between A and B in ratio of 1:1

Therefore entry to record transaction using bonus method is:

Debit C capital $30,000, Credit Cash $25,000, Credit A capital $2,500, Credit B capital $2,500

Hence option b is correct.

Solution 21:

Balance in C capital = $30,000

Amount paid on to C on selling interest by partnership = $32,000

C share of goodwill = $32,000 - $30,000 = $2,000

C's share in profits = 1/5 = 20%

Goodwill for entire partnership = $2,000 / 20% = $10,000

A's share in goods will = $10,000 * 2/5 = $4,000

Hence option b is correct.

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