Final answer:
The partnership journal entry to record Hopkins's withdrawal consists of debiting the Cash account for $230,000, crediting Hopkins's Capital account for $210,000, and debiting both Hammel's and Houghton's Capital accounts for $10,000 each, as they bear the excess payment equally.
Step-by-step explanation:
The question involves preparing a journal entry for a partnership when one partner withdraws. Specifically, Hopkins is withdrawing from the partnership with Hammel and Houghton. Upon withdrawal, Hopkins receives a higher amount than her capital balance. Since the partners share income and losses equally, the excess amount paid to Hopkins should be recorded as a deduction from the capital accounts of the remaining partners, Hammel and Houghton.
To prepare the journal entry on December 31, first it is necessary to calculate Hopkins's share based on the partnership agreement. Hopkins's capital account balance is $210,000. However, she agrees to take $230,000 upon her withdrawal, which is $20,000 more than her capital account balance. This means that each of the remaining partners, Hammel and Houghton, will bear half of the $20,000 excess payment. The entry would be:
- Cash (debit) - $230,000
- Hopkins's Capital (credit) - $210,000
- Hammel's Capital (debit) - $10,000
- Houghton's Capital(debit) - $10,000
This entry records the cash paid out to Hopkins and adjusts the capital accounts of the remaining partners.