Question

​Ronald, Ross, and Carol opened a partnership firm. Ronald has a capital of​ $77,000; Ross has a capital of​ $119,000; and Carol has a capital of​ $91,000. Ronald decided to withdraw from the partnership and received​ $86,000. Which of the following will be included in the journal entry to record​ this? (Assume an equal​profit-loss sharing between the existing​ partners.) A. ​Carol, Capital is debited for​ $4,500. B. ​Ross, Capital is credited for​$4,500. C. Cash is credited for​ $9,000. D. ​Ross, Capital is debited for​ $9,000.

Answer 1

Answer:

A. Carol, Capital is debited for $4,500

Explanation:

The question says to determine amount to be included in the journal entry to record Ronald's withdrawal from the partnership

Assumption: Equal Profit- loss sharing is the agreement between the existing partners.

First premise: Ronald's Capital in the Partnership = $77,000

However, Ronald received a payment of $86,000 meaning that there is an excess of $86,000-$77,000= $9,000

Since the agreement is equal profit and loss sharing, it means each of Ross and Carol will contribute 1/2 of the $9,000.

The journal entry to record this transaction is as follows:

Particulars                                          Debit                     Credit

Carol Capital Account                      $4,500

Ross Capital Account                       $4,500

Ronald Capital Account                                                  $9,000

Being the equal contribution of excess amount paid to Ronald on exit from the partnership by Carol and Ross.

Based on the multiple choices, the correct answer is Carol, Capital is debited for $4,500