May Cheng and Hannah Webster are partners who share in the income equally and have
capital balances of $207,000 and $62,500, respectively. Cheng, with the consent of
Webster, sells one-third of her interest to Michael Cross. What entry is required by the
partnership if the sales price is (a) $60,000? (b) $80,000?
(a) If the sales price is $60,000, the entry required by the partnership is as follows:
May Cheng Capital account:
Debit: $20,000 (1/3 of $60,000)
Michael Cross Capital account:
Debit: $20,000 (1/3 of $60,000)
Hannah Webster Capital account:
No change
Cash account:
Credit: $40,000 (Sales price - May Cheng's share)
(b) If the sales price is $80,000, the entry required by the partnership is as follows:
May Cheng Capital account:
Debit: $26,667 (1/3 of $80,000)
Michael Cross Capital account:
Debit: $26,667 (1/3 of $80,000)
Hannah Webster Capital account:
No change
Cash account:
Credit: $53,333 (Sales price - May Cheng's share)