On December 31,the capital balances and income ratios in FAD Company are as follows.
|
Partner |
Capital Balance |
Income Ratio |
|
J. Fagan |
$60,000 |
50% |
|
P.Ames |
40,000 |
30% |
|
K. Durham |
26,000 |
20% |
Instructions
(a) Journalize the withdrawal of Durham under each of the following assumptions.
(1) Each of the continuing partners agrees to pay $18,000 in cash from personal funds to purchase Durham’s ownership equity. Each receives 50% of Durham’s equity.
(2) Ames agrees to purchase Durham’s ownership interest for $25,000 cash.