E 16-12 Partner retirement entries—Fair value adjustment
A balance sheet at December 31, 2016, for the Bec, Dee, and Lyn partnership is summarized as follows:
Assets
$800,000
Liabilities
$200,000
Loan to Dee
100,000
Bec capital (50%)
300,000
$900,000
Dee capital (40%)
Lyn capital (10%)
Dee is retiring from the partnership. The partners agree that partnership assets, excluding Dee’s loan, should be adjusted to their fair value of $1,000,000 and that Dee should receive $310,000 for her capital balance net of the $100,000 loan. The bonus approach is used; therefore, no goodwill is recorded.
Required
Determine the capital balances of Bec and Lyn immediately after Dee’s retirement.
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