On December 31, the capital balances and income ratios in SAR Company are as follows.
|
Partner |
Capital Balance |
Income Ratio |
|
Spargo |
$60,000 |
50% |
|
Ames |
40,000 |
30% |
|
Ruscoe |
26,000 |
20% |
Instructions
(a) Journalize the withdrawal of Ruscoe under each of the following assumptions.
(1) Each of the continuing partners agrees to pay $18,000 in cash from personal funds to purchase Ruscoe’s ownership equity. Each receives 50% of Ruscoe’s equity.
(2) Ames agrees to purchase Ruscoe’s ownership interest for $25,000 cash.
(3) Ruscoe is paid $34,000 from partnership assets, which includes a bonus to the retiring partner.
(4) Ruscoe is paid $22,000 from partnership assets, and bonuses to the remaining partners are recognized.
(b) If Ames’s capital balance after Ruscoe’s withdrawal is $42,400, what were (1) the total bonus to the remaining partners and (2) the cash paid by the partnership to Ruscoe?