Question

Partnership records show the following capital balances at the date of Hopkin's withdrawal: M. Hammel, $80,000; D. Hopkins, $210,000; and P. Houghton, $100,000. The three partners share income and loss equally. On December 31, after the death of Hopkins, the two remaining partners, Hammel and Houghton, and the estate of Hopkins agree that a payment of $200,000 will be made to settle the capital balance of Hopkins. Prepare the December 31 journal entry for the partnership.

Answer 1

Answer:

The Journal entry is as follows:

D. Hopkins, Capital A/c  Dr. $210,000

          To cash A/c                                   $200,000

          To M. Hammer's Capital A/c        $5,000

          To P. Houghton's capital A/c       $5,000

(To record the amount of Hopkins Capital balance)

Workings:

Income = D. Hopkins, Capital - Cash payment after his death

             = $210,000 - $200,000

             = $10,000

$10,000 is divided equally among M. Hammer and P. Houghton.