Floyd and Merriam Start a Partnership Business on June 12

question 129

Short Answer

Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows: Floyd agrees to sell half of his share to Ramelow in exchange for $32,000 cash. Which of the following is the correct journal entry in the books of the firm for the above transfer of interest?

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Definitions:

Incremental Cost

The additional cost that a company incurs when producing one additional unit of product or serving one additional customer.

Variable Overhead

Costs that fluctuate with production volume, such as utilities and indirect materials, which do not directly correlate to unit production.

Direct Materials

Raw materials that can be directly attributed to the production of a product, essential in calculating the cost of goods sold.

Direct Labor

The wages and benefits paid to workers who are directly involved in the production of goods or the provision of services.