(Solved Homework): N. Essex, C. Gilmore, and C. Heganbart have capital balances of $48,000, $41,300, and $34,800, respectively. Their inc…

N. Essex, C. Gilmore, and C. Heganbart have capital balances of $48,000, $41,300, and $34,800, respectively. Their income ratios are 4 : 4 : 2. Heganbart withdraws from the partnership under each of the following independent conditions.

Essex and Gilmore agree to purchase Heganbart’s equity by paying $16,800 each from their personal assets. Each purchaser receives 50% of Heganbart’s equity.

Gilmore agrees to purchase all of Heganbart’s equity by paying $14,000 cash from her personal assets.

Essex agrees to purchase all of Heganbart’s equity by paying $25,600 cash from his personal assets.

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(Solved Homework): N. Essex, C. Gilmore, and C. Heganbart have capital balances of $48,000, $41,300, and $34,800, respectively. Their inc…

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Journalize the withdrawal of Heganbart under each of the assumptions above

Expert Answer

When the retiring partners are settled privately the valuation will not matter to the Firm. The excess or less paid will be adjusted in personal books of Heganbart. Since the settlement is being done privately in all 3 alternatives, the question will be whose capital account will be credited.

Option A:

Heganbart’s Capital Dr 34800

To Essex’s capital 17400

To Gilmore’s capital 17400

(50% portion purchased by each)

Option B:

Heganbart’s Capital Dr 34800

To Gilmore’s capital 34800

(50% portion purchased by each)

Option C:

Heganbart’s Capital Dr 34800

To Essex’s capital 34800

(50% portion purchased by each)

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