Keith and Jim are partners.Keith has a capital balance of $54,000 and Jim has a capital balance of $32,000.Jim sells $11,000 of his ownership to Bill.Which of the following is true of the journal entry to admit Bill?
A)Bill,capital will be debited for $21,000.
B)Bill,capital will be credited for $11,000.
C)Jim,capital will be debited for $21,000.
D)Jim,capital will be credited for $11,000.

Question

Quizplus · Accepted Answer

When Bill buys $11,000 ownership in the partnership, his contribution becomes a part of the partnership capital. As a result, Bill's capital account will be credited for $11,000. Since Jim sold $11,000 of his ownership, his capital balance will decrease by $11,000. Therefore, Jim's capital account will be debited for $11,000. There is no need to debit or credit Keith's capital account as he is not involved in this transaction. The entry will be:
Debit Jim, capital $11,000
Credit Bill, capital $11,000

Keith and Jim Are Partners