When Danny withdrew from John, Daniel, Harry, and Danny, LLP, he was paid $80,000, although his capital account balance was only $60,000. The four partners shared net income and losses equally, and no revaluation will take place. The journal entry to record the effect on John's capital due to Danny's withdrawal would include:
A) $6,667 debit to John, Capital.
B) $6,667 credit to John, Capital.
C) $20,000 debit to John, Capital.
D) $5,000 debit to John, Capital.
E) $5,000 credit to John, Capital.

Question

Quizplus · Accepted Answer

Danny was paid $20,000 more than his capital account balance. This excess amount is shared equally among the remaining partners, resulting in a $6,667 debit to each partner's capital account, including John's.

When Danny Withdrew from John, Daniel, Harry, and Danny, LLP