Table 12-9
Wally, Willie, and Watson formed a partnership several years ago. Wally has decided to withdraw from the partnership. The current capital balances are: Wally, capital, $50,000; Willie, capital, $65,000; and Watson, capital, $100,000. Prior to the withdrawal of Wally, the partners agree to revalue some of the partnership assets. Inventory with a cost of $120,000 has a current market value of $150,000; land with a cost of $50,000 has a current market value of $125,000. Wally, Willie, and Watson share net income and losses in a 3:3:4 ratio. Willie and Watson will share net income in a 3:4 ratio.
-Refer to Table 12-9.The journal entry to record the revaluation of the partnership's assets would include:

Question

Quizplus · Accepted Answer

To revalue the assets of the partnership, the following journal entries will be made:
- Debit to Inventory for $30,000 (revaluation increase)
- Debit to Land for $75,000 (revaluation increase)
- Credit to Wally, Capital for $25,000 (1/3 share of inventory revaluation)
- Credit to Willie, Capital for $25,000 (1/3 share of inventory revaluation)
- Credit to Watson, Capital for $33,333 (4/10 share of total revaluation increase, which is $105,000)
Therefore, all of the given options will be included in the journal entry to record the revaluation of the partnership's assets.

Table 12-9 Wally, Willie, and Watson Formed a Partnership Several Years Ago