Partnership Buyout Agreement

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Partnership Buyout Agreement Powered By Docstoc
					Chapter 12


     Accounting for Partnerships
       Partnership Creation

         Event                 Ries        Bax       Total
4/13/2007
     Initial Investment    $    10,000 $    10,000   $20,000


                When a partnership is created,
                 the amount of the partner’s
                contribution is credited to their
                     individual accounts.
       Recording net income
       and withdrawals


          Event               Ries          Bax          Total
4/13/2007
     Initial Investment   $    10,000   $   10,000   $     20,000

12/31/2007
    Income (equal)              7,500        7,500         15,000
    Withdrawals                (4,000)      (7,000)       (11,000)
    Ending Balance        $    13,500 $     10,500 $       24,000
        Admission of new partner and
        distribution of year end items
        Event               Ries        Bax          Royce           Total
    Ending Balance      $    13,500 $   10,500                   $     24,000

1/1/2008
     New Investment                              $    12,000     $     12,000

12/31/2008
    10% interest              1,350       1,050         1,200           3,600
    Salaries                              5,000         5,000          10,000
    Remainder (equal)         8,800       8,800         8,800          26,400
    Withdrawals              (5,000)    (12,500)      (11,000)        (28,500)
    Ending Balance      $    18,650 $    12,850 $      16,000    $     47,500
Journal Entries for 2008
Jan 1, 2008 Cash                                          12,000
                  Royce, Capital                                   12,000
                       to record investment of Royce
Dec. 31, 2008 Income Summary                              40,000
                    Ries, Capital                                  10,150
                    Bax, Capital                                   14,850
                    Royce, Capital                                 15,000
                         to allocate interest, salaries
                         and remainder to partners
Dec. 31, 2008 Ries, Withdrawals                            5,000
              Bax, Withdrawals                            12,500
              Royce, Withdrawals                          11,000   28,500
                    Cash
                         to record cash withdrawals
                         by partners
Dec.31, 2008 Ries, Capital                                 5,000
              Bax, Capital                                12,500
              Royce, Capital                              11,000
                    Ries Withdrawals                                5,000
                    Bax, Withdrawals                               12,500
                    Royce, Withdrawals                             11,000
                         to close partner's withdrawals
            Sale of a partnership interest
         Event               Ries           Bax        Royce     Murdock Elway       Total
    Ending Balance       $    18,650 $      12,850 $    16,000                   $     47,500

1/1/2009
     Transfer interest       (18,650)                              18,650        $        -

12/31/2009
    Salaries                                25,000      25,000                         50,000
    Remainder                               (5,000)     (5,000)     (5,000)           (15,000)
    Withdrawals                             (2,500)     (2,000)                        (4,500)
    Ending Balance       $       -      $   30,350 $    34,000 $   13,650        $     78,000
          Another change in partnership
        Event                 Ries            Bax        Royce      Murdock Elway         Total

    Subotal Balance                   0        30,350      34,000      13,650   60,000     138,000


    Bonuses to Elway                          (3,000)     (3,000)     (3,000)   9,000            -
    Adjusted Balance      $       -       $   27,350 $    31,000 $    10,650 $ 69,000 $    138,000

12/31/2010
    20% interest                          $    5,470 $     6,200 $     2,130 $ 13,800 $     27,600
    Remainder (1:1:1:2) *                      20,000      20,000      20,000   40,000      100,000
    Withdrawals                               -25,000     -27,000     -15,000  -40,000     -107,000
    Ending Balance        $       -       $   27,820 $    30,200 $    17,780 $ 82,800 $    158,600

* (1:1:1:2 ratio equivalent to 20%, 20%, 20%, 40%)
           Partnership Buyout-
           revaluation gain distributed

        Event                 Ries          Bax           Royce     Murdock Elway        Total
1/1/2011
     Gain *                                  10,000        10,000     10,000    20,000    50,000
     Adjusted Balance         out            37,820        40,200     27,780   102,800   208,600

     * (1:1:1:2 ratio equivalent to 20%, 20%, 20%, 40%)




        The revaluation gain is distributed according to
        the agreed upon ratios.
          Transfer of interest
        Event            Ries      Bax      Royce     Murdock Elway        Total
Adjusted Balance        out        37,820    40,200     27,780   102,800    208,600
Transfer interests                -37,820   -40,200               78,020          0
Adjusted Balances             0         0         0     27,780   180,820    208,600




                     The transfer of interest is made from
                     the outgoing partners to the partner
                     buying out the interest in accordance
                     with the buyout agreement.
            Dissolution of Partnership
          Event                 Ries        Bax        Royce       Murdock Elway          Total
2/29/11
     Income distributed (1:9)   out         out         out            $1,000    $9,000     $10,000
     Adjusted Balances                 $0         $0          $0      $28,780 $189,820     $218,600
     Settlements                                                     -$28,780 -$189,820   -$218,600
     Final Balances                    $0         $0          $0           $0        $0          $0

				
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