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,$30,000.After all the assets are sold and liabilities are paid,but before any contributions to cover any deficiencies,there is $54,000 in cash to be distributed.The general journal entry to record the final distribution would be:
A)Debit Masters,Capital $18,000;debit Hardy,Capital $18,000;debit Rowen,Capital $18,000;credit Cash $54,000.
B)Debit Masters,Capital $13,500;debit Hardy,Capital $13,500;debit Rowen,Capital $27,000;credit Cash $54,000.
C)Debit Masters,Capital $15,000;debit Hardy,Capital $15,000;debit Rowen,Capital $30,000;credit Gain from Liquidation $6,000;credit Cash $54,000.
D)Debit Cash $54,000;credit Rowen,Capital $13,500;credit Masters,Capital $13,500;credit Hardy,Capital $27,000.
E)Debit Masters,Capital $15,000;debit Hardy,Capital $15,000;debit Rowen,Capital $30,000;credit Retained Earnings $6000;credit Cash $54,000.

Question

Quizplus · Accepted Answer

Since income and losses are shared equally among the three partners and their ending balances are Masters $15,000, Hardy $15,000, and Rowen $30,000, it means that Rowen contributed more to the partnership than the other two partners. Therefore, Rowen's share of the cash to be distributed should be higher than the others.

The total amount of cash to be distributed is $54,000. Since the ending capital account balances of the partners sum up to $60,000 (Masters $15,000 + Hardy $15,000 + Rowen $30,000), there is a deficiency of $6,000 that needs to be covered. This deficiency is distributed among the partners based on their ending capital account balances.

The final distribution would be debit Masters, Capital $13,500; debit Hardy, Capital $13,500; debit Rowen, Capital $27,000; credit Cash $54,000.

Masters,Hardy,and Rowen Are Dissolving Their Partnership