Justin Marley is to retire from the partnership of Marley and Associates as of M
ID: 2477343 • Letter: J
Question
Justin Marley is to retire from the partnership of Marley and Associates as of March 31, the end of the current fiscal year. After closing the accounts, the capital balances of the partners are as follows: Justin Marley, $140,000; Cherrie Ford, $70,000; and LaMarcus Rollins, $60,000. They have shared net income and net losses in the ratio of 3:2:2. The partners agree that the merchandise inventory should be increased by $15,500, and the allowance for doubtful accounts should be increased by $1,500. Marley agrees to accept a note for $100,000 in partial settlement of his ownership equity. The remainder of his claim is to be paid in cash. Ford and Rollins are to share equally in the net income or net loss of the new partnership.
Journalize the entries to record (a) the adjustment of the assets to bring them into agreement with current market prices and (b) the withdrawal of Marley from the partnership. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTS Marley and Associates General Ledger ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 113 Allowance for Doubtful Accounts 114 Interest Receivable 115 Notes Receivable 116 Merchandise Inventory 117 Office Supplies 118 Store Supplies 119 Prepaid Insurance 120 Land 123 Equipment 124 Accumulated Depreciation-Equipment 129 Asset Revaluations 133 Patent LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Justin Marley, Capital 311 Justin Marley, Drawing 312 Cherrie Ford, Capital 313 Cherrie Ford, Drawing 314 LaMarcus Rollins, Capital 315 LaMarcus Rollins, Drawing 330 Income Summary REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 520 Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Equipment 523 Delivery Expense 524 Repairs Expense 529 Selling Expenses 531 Rent Expense 533 Insurance Expense 534 Office Supplies Expense 535 Store Supplies Expense 536 Credit Card Expense 537 Cash Short and Over 538 Bad Debt Expense 539 Miscellaneous Expense 710 Interest ExpenseExplanation / Answer
Increase in Merchandise 15500 Allowance for DD -1500 Net Effect 14000 Ratio 3:2:2 7 For Justin Marley 6000 For this Marley capital is to be increased by 6000 and other two partners capital is to be decreased For adjustment of assets Cherrie Ford, Capital $ 3,000.00 LaMarcus Rollins, Capital $ 3,000.00 Justin Marley, Capital $ 6,000.00 Withdrawal of marley Justin Marley, Capital $ 146,000.00 Notes Receivable $ 100,000.00 Cash $ 46,000.00
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