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:
A)Debit Henry,Capital $25,667;debit Luther,Capital $25,667;debit Gage,Capital $25,666;credit Cash $77,000.
B)Debit Henry,Capital $42,500;debit Luther,Capital $34,500;credit Cash $77,000.
C)Debit Henry,Capital $45,000;debit Luther,Capital $37,000;credit Gage,Capital $5,000;credit Cash $77,000.
D)Debit Cash $77,000,debit Gage,Capital $5,000,credit Henry,Capital $45,000,credit Luther,Capital $37,000.
E)Debit Cash $77,000;credit Henry,Capital $25,667;credit Luther,Capital $25,667;credit Gage,Capital $25,666.

Question

Quizplus · Accepted Answer

Gage's deficiency of $5,000 is absorbed by Henry and Luther equally, reducing their capital balances to $42,500 and $34,500, respectively, which matches the cash available for distribution.

Henry,Luther,and Gage Are Dissolving Their Partnership