Masters, Hardy, and Rowen are dissolving their partnership. Their partnership ag
ID: 2418435 • Letter: M
Question
Masters, Hardy, and Rowen are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Masters, $15,000; Hardy, $15,000; Rowen, $(2,000). After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $28,000 in cash to be distributed. Rowen pays $2,000 to cover the deficiency in his account. The general journal entry to record the final distribution would be:
a. Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Cash $30,000.
b. Debit Masters, Capital $14,000; debit Hardy, Capital $14,000; credit Cash $28,000.
c. Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Rowen, Capital $2,000; credit Cash $28,000.
d. Debit Cash $28,000; debit Rowen, Capital $2,000; credit Masters, Capital $15,000; credit Hardy, Capital $15,000.
e. Debit Masters, Capital $9,334; debit Hardy, Capital $9,333; debit Rowen, Capital $9,333; credit Cash $28,000.
Explanation / Answer
1. cash Account Dr $2000
To capital account balances Rowen $2000
9 being The Debit balance in Rowen Capital account is received / recovered by cash)
2. capital account balances are Masters Dr $15,000
capital account balances are Hardy Dr $15,000
To Cash $ 30000
( Being Distribution of $ 15000 each paid to Masters & Hardy)
Therefore the answer is a. Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Cash $30,000.