Part 1. Gibbs, Hook, and Chan are partners and share income and loss in a 5:1:4 ratio (in percents: Gibbs, 50%; Hook, 10%; and Chan, 40%). The partnership’s capital balances are as follows: Gibbs, $606,000; Hook, $148,000; and Chan, $446,000. Gibbs decides to withdraw from the partnership. Prepare journal entries to record Gibbs’s April 30 withdrawal under each separate assumption:
a. Gibbs sells her interest to Brady for $250,000 after Brady is approved as a partner.
b. Gibbs gives her interest to a daughter-in-law, Kannon, and Kannon is approved as a partner.
c. Gibbs is paid $606,000 in partnership cash for her equity.
d. Gibbs is paid $350,000 in partnership cash for her equity.
Part 2. Assume that Gibbs does not retire from the partnership described in part 1. Instead, Chip is admitted to the partnership on April 30 with a 20% equity. Prepare journal entries to record the entry of Chip under each separate assumption: Chip invests (a) $300,000; (b) $196,000; and (c) $426,000.
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