Question

The ​, ​, and partnership balance sheet reports capital of for ​, for ​, and for . is withdrawing from the firm. The partners have shared profits and losses in the ratio of to ​, to ​, and to . The partnership agreement states that a withdrawing partner will receive cash equal to the book value of his​ partners' equity. Journalize the withdrawal of .

Answer 1

Complete Question:

The O'Hara, Parness​​, and Lincoln partnership balance sheet reports capital of $50,000 for O'Hara​, $125,000, for Parness​, and $25,000 for Lincoln.  O'Hara is withdrawing from the firm. The partners have shared profits and losses in the ratio of 1/2 to O'Hara​, 1/4 to ​Parness, and 1/4 to Lincoln. The partnership agreement states that a withdrawing partner will receive cash equal to the book value of his​ partners' equity. Journalize the withdrawal of O'Hara.

Answer:

The O'Hara, Parness​​, and Lincoln Partnership

Journal Entry:

Date      Description                   Debit              Credit

            O'Hara Capital A/c     $50,000

            Cash Account                                       $50,000

To record the withdrawal of O'Hara and his capital interest.

Explanation:

The Partnership of O'Hara, Parness, and Lincoln can use the journal entry as above to record the withdrawal of a partner.  The O'Hara's Capital account previously had a credit balance and cash will be involved in settling O'Hara, the journal entries to complete the withdrawal of O'Hara are a debit to the O'Hara's Capital account and a credit to the Cash account.  This arrangement is in accordance with the partnership agreement.  This is the most important governing law for the partnership and everything or transaction affecting the partnership must be done accordingly.  It is only in the absence of an agreement that the laws or general practise concerning partnership can be applied.