Marshall retires from the partnership of Marshall,Mark and Dennis.Marshall had a capital balance of $15,000.If Marshall received $15,000 as final settlement,how will this transaction affect the balance sheet items?
A)Equity will decrease.
B)Liabilities will decrease.
C)Cash will increase.
D)Liabilities will increase.

Question

Quizplus · Accepted Answer

Marshall's retirement results in a decrease in the total equity of the partnership, as his capital balance is subtracted from the total equity of the remaining partners. The cash account would remain the same, as Marshall is receiving his settlement in cash but also relinquishing his share of the partnership's cash balance. There is no change in liabilities as a result of Marshall's retirement.

Marshall Retires from the Partnership of Marshall,Mark and Dennis