Withdrawal of Partner Lane Stevens is to retire from the partnership of Stevens and Associates as of March 31, the end of the current fiscal year. After closing the accounts, the capital balances of the partners are as follows: Lane Stevens, $150,000; Cherie Ford, $70,000; and LaMarcus Rollins, $60,000. They have shared net income and net losses in the ratio of 3:2:2. The partners agree that the merchandise inventory should be increased by $22,300 and the allowance for doubtful accounts should be increased by $1,300. Stevens agrees to accept a note for $100,000 in partial settlement of his ownership equity. The remainder of his claim is to be paid in cash. Ford and Rollins are to share equally in the net income or net loss of the new partnership. a. Journalize the entry to record the adjustment of the assets to bring them into agreement with current market prices. For a compound transaction, if an amount box does not require an entry, leave it blank.

Check the explanation

Explanation:

Req A:      

Journal Entries for Adjustment of Assets    

                                                                                     Dr In $     Cr in $  

Merchandise Inventory Dr.                                        22,300  

Revaluation Account Cr.                                                             22,300  

Revaluation Account Dr.                                            1,300  

Allowance for Doubtful debts Cr.                                              1,300  

Revaluation Account Dr.                                             21,000  

Lane Stevens Capital Cr.                                                              9,000  

Cherrie Ford Capital Cr.                                                               6,000  

La Marcus Ford Capital Cr.                                                          6,000  

Req B:      

Journal Entries To record of Stevens Withdrawal  

Lane Stevens Capital Dr. (150,000+9,000)          159,000  

Note Payable Cr.                                                                        100,000  

Cash Account Cr.                                                                        59,000

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