Answer:
Journal Entry
a) Debit Capital- Benson $138,000 Credit Capital-North $138,000
b) Debit Capital- Benson $138,000 Credit Capital-Schmidt $138,000
c) Debit Capital-Benson $138,000 Credit Bank $138,000
d) Debit Capital-Benson $138,000 Debit Capital-Meir $28,500 Debit Capital-Lau $47,500 Credit Bank $214,000
e) Debit Capital-Benson $138,000 Debit Accumulated Depreciation $23,000 Credit Cash $30,000 Credit Equipment $70,000 Credit Capital-Meir $22,875 Credit Capital-Lau $38,125
Explanation:
a and b are the same with the same amount of capital transferred from one partner to another partner, it is just a matter of derecognizing Benson and recognize North or Schmidt.
c) Partner Benson is paid cash her capital,
d) decrease in meir's Capital = 214,000-138,000 = 76,000*3/8= $28,500
Decrease in Lau's Capital Account = $76,000 5/8 = 47,500
Excess funds are taken from capitals or income summary account of the partnership which will affect the capitals of the remaining partners
e) Meir's Capital = $138,000 -(70,000-23,000+30,000)
= $138,000-77,000
= $61,000*3/8 =$22,875
Lau = $61,000*5/8 =38,125
The Capital Accounts of the remaining partners will increase because of the gain made on buying out the leaving partner.
