Answered

Welcome to Westonci.ca, where curiosity meets expertise. Ask any question and receive fast, accurate answers from our knowledgeable community. Discover a wealth of knowledge from experts across different disciplines on our comprehensive Q&A platform. Get immediate and reliable solutions to your questions from a community of experienced professionals on our platform.

Henry, Luther, and Gage are dissolving their partnership. Their partnership agreement allocates each partner 1/3 of all income and losses. The current period's ending capital account balances are Henry, $45,000; Luther, $37,000; and Gage, $(5,000). After all assets are sold and liabilities are paid, there is $77,000 in cash to be distributed. Gage is unable to pay the deficiency. The journal entry to record the distribution should be:

Sagot :

Answer and Explanation:

The journal entry to record the distribution is as follows;

But before that following calculations need to be required

Capital, Henry = $45,000

Capital, Luther = $37,000

Capital, Gage = -$5,000

Now there is a deficiency in the gage capital account i.e. $5,000 should be borne by Henry and Luther in equal ratio i.e. $2,500 each  

Now the henry final balance is

= $45,000 - $2,500

= $42,500

And, the luther final balance is

= $37,000 - $2,500

= $34,500

Now the journal entry is  

Henry, capital $42,500  

Luther, capital $34,500  

                  To Cash $77,000

(Being distribution is recorded)

here the capital account is credited as it reduce the stockholder equity and cash is credited as it also reduced the assets

Thanks for using our service. We aim to provide the most accurate answers for all your queries. Visit us again for more insights. Thanks for using our service. We're always here to provide accurate and up-to-date answers to all your queries. Thank you for visiting Westonci.ca, your go-to source for reliable answers. Come back soon for more expert insights.