Peters,Chong,and Aaron are dissolving their partnership.Their partnership agreement allocates each partner an equal share of all income and losses.The current period's ending capital account balances are Peters,$54,000;Chong,$42,000;and Aaron,$(2,000).After all assets are sold and liabilities are paid,there is $94,000 in cash to be distributed.Aaron is unable to pay the deficiency.The journal entry to record the distribution should be:
A)Debit Peters,Capital $54,000;debit Chong,Capital $40,000;credit Cash $94,000.
B)Debit Peters,Capital $54,000;debit Chong,Capital $42,000;credit Cash $96,000.
C)Debit Peters,Capital $53,000;debit Chong,Capital $41,000;credit Cash $94,000.
D)Debit Cash $94,000,debit Aaron,Capital $2,000,credit Peters,Capital $54,000,credit Chong,Capital $42,000.
E)Debit Cash $94,000;credit Peters,Capital $47,000;credit Chong,Capital $47,000.

Question

Quizplus · Accepted Answer

Since Aaron cannot pay his deficiency, Peters and Chong must absorb it equally. Aaron's deficiency is $2,000, so each of Peters and Chong will absorb $1,000. Therefore, Peters' capital account will be debited $53,000 and Chong's $41,000, totaling the $94,000 cash available.

Peters,Chong,and Aaron Are Dissolving Their Partnership