Advanced Accounting 11th Edition by Paul Fischer,William Tayler, Rita Cheng

Exercise 19

Impact on capital balances of a partner withdrawing. After being a partner for over 10 years, Ziegler has decided to sell her interest in a partnership with Grossman and Casper. Prior to the date of the sale and subsequent to the allocation of profits and drawing balances, information concerning the partners was as follows:
Determine the capital balances for Grossman and Casper assuming that Ziegler sells her interest in the partnership under the following independent scenarios.
1. Ziegler sells her interest to Grossman for $160,000, and the price paid is not used to recognize changes in value of recorded net assets of the entity.
2. Ziegler sells her interest to Grossman for $160,000, and the price paid is used to only recognize decreases in value of existing assets.
3. Ziegler sells her interest to the partnership for $160,000, and the bonus method is used to account for the transaction. Suggested decreases in the value of assets are recognized.
4. Ziegler sells her interest to the partnership for $160,000, and the goodwill traceable to the withdrawing partner is recognized. Suggested decreases in the value of assets are recognized.
5. Ziegler sells her interest to the partnership for $160,000, and the goodwill traceable to the entire partnership entity is recognized. Suggested decreases in the value of assets are recognized.
6. Ziegler sells her interest to the partnership for $160,000, and the goodwill traceable to the entire partnership entity is recognized. All changes in the value of existing assets are recognized.