Assets Merchandise Inventory Hu - Kuo - Lo Oriental Design is a partnership owne
ID: 2493020 • Letter: A
Question
Assets
Merchandise Inventory
Hu - Kuo - Lo Oriental Design is a partnership owned by three individuals. The partners share profits and losses in the ratio of 30% to Hu, 40% to Kuo and 30% to Lo. At December 31, 2016, the firm has the above balance sheet.
On December 31,Hu withdraws from the partnership.
Requirement 1. In a personal transaction,Hu sells her equity to Wong, who pays Hu $140,000 for her interest. Kuo and Lo agree to accept Wongas a partner. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.)
Date
Accounts and Explanation
Debit
Credit
Requirement 2.
The partnership pays Hu cash of $15,000 and gives her a note payable for the remainder of her book equity in settlement of her partnership interest. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.)
Date
Accounts and Explanation
Debit
Credit
Requirement 3.
The partnership pays Hu $ 45,000 for her book equity. (Record debits first, then credits. Select the explanation on the last line of the journal entry table. Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar.)
Date
Accounts and Explanation
Debit
Credit
Requirement 4.
The partnership pays Hu $18,000 for her book equity. (Record debits first, then credits. Select the explanation on the last line of the journal entry table. Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar.)
Date
Accounts and Explanation
Debit
Credit
Assets
Liabilities Cash $17,000 Accouts Payable $81,000 Accounts Receivable, Net 14,000 Partners EquityMerchandise Inventory
96,000 Hu, Capital 33,000 Equimpment Net 75,000 Kuo, Capital 40,000 Lo, Capital 48,000 Total Partners Equity $121,000 Total Assets $202,000 Total Liabilities and Partners' Equity 202,000Explanation / Answer
Answer 1:
Date
Accounts and Explanation
Debit
Credit
Wong, Capital A/c
(Hu has sold her equity to wang)
We will record this transaction @ 33,000 only and not with $ 140,000 because any amount paid above $ 33,000 will be personal profit of Hu and not of partnership firm
Answer 2:
Date
Accounts and Explanation
Debit
Credit
To Cash A/c
To Note payable A/c
(amount paid to hu against her capital claim in partnership firm)
Hu will receive 15,000 in cash amount and remaining amount as note receivable from partnership firm, so entry recorded accordingly
Answer 3:
Date
Accounts and Explanation
Debit
Credit
Goodwill A/c
To cash A/c
(45,000 paid to hu against her capital claim in partnership firm)
Amount paid to hu is more than book value of capital, so additional amount represents goodwill of firm and same should be recorded in the books
Answer 4:
Date
Accounts and Explanation
Debit
Credit
To Cash A/c
To Reserve A/c,
(amount paid to retiring partner)
Amount paid to retiring partner less than book value of capital. Such less amount should be transferred to reserve account or in the account of remaining partner's capital account
Date
Accounts and Explanation
Debit
Credit
December 31,2016 Hu, Capital A/c Dr. 33,000Wong, Capital A/c
33,000(Hu has sold her equity to wang)
We will record this transaction @ 33,000 only and not with $ 140,000 because any amount paid above $ 33,000 will be personal profit of Hu and not of partnership firm
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