The partners in the ABC partnership have capital balances as follows:
Profits and losses are shared 30%,20%,and 50%,respectively.
On this date,C withdraws and the partners agree to pay him $140,000 out of partnership cash.
Required:
A.Prepare journal entries to show three acceptable methods of recording the withdrawal.(Tangible assets are already stated at values approximating their fair market values.)
B.Which alternative would you recommend if you determined that the agreement to pay C $140,000 was not the result of arms length bargaining between C and the other partners? Why?

Question

The partners in the ABC partnership have capital balances as follows:
  Profits and losses are shared 30%,20%,and 50%,respectively.
On this date,C withdraws and the partners agree to pay him $140,000 out of partnership cash.
Required:
A.Prepare journal entries to show three acceptable methods of recording the withdrawal.(Tangible assets are already stated at values approximating their fair market values.)
B.Which alternative would you recommend if you determined that the agreement to pay C $140,000 was not the result of arms length bargaining between C and the other partners? Why?

Quizplus · Accepted Answer

The Answer of The partners in the ABC partnership have capital balances as follows:
  Profits and losses are shared 30%,20%,and 50%,respectively.
On this date,C withdraws and the partners agree to pay him $140,000 out of partnership cash.
Required:
A.Prepare journal entries to show three acceptable methods of recording the withdrawal.(Tangible assets are already stated at values approximating their fair market values.)
B.Which alternative would you recommend if you determined that the agreement to pay C $140,000 was not the result of arms length bargaining between C and the other partners? Why?

The Partners in the ABC Partnership Have Capital Balances as Follows