Asked by Lyric Bolden on May 20, 2024
Verified
Assume the partnership of Howell, Madrid, and Waldrop has been in existence for a number of years.Howell decides to withdraw from the partnership when the partners' capital balances are as follows: An appraisal of the business and its net assets estimates the fair value to be $154,000. Land with a book value of $20,000 has a fair value of $35,000.Howell has agreed to receive $84,000 in exchange for her partnership interest.Prepare the journal entries for the dissolution of Howell's partnership interest, assuming the goodwill method is to be applied.
Goodwill Method
An accounting method used to evaluate the excess of purchase price over the fair value of net identifiable assets acquired in a business combination.
Journal Entries
Recorded transactions in the accounting records of a business that are used to transfer amounts from one account to another, ensuring the ledger remains in balance.
Fair Value
Fair value is an estimate of the market value of an asset, based on its current price in a fair and open market transaction.
- Compute the revised capital accounts after a new partner joins or an existing partner departs.
Verified Answer
Learning Objectives
- Compute the revised capital accounts after a new partner joins or an existing partner departs.
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