After closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows: Sanchez, $20,000; Dorvinsky, $30,000; Davenport, $45,000. Partners share profits and losses as follows: Sanchez, 20%; Dorvinsky, 30%; and Davenport, 50%. If Davenport retired and withdrew $40,000 in settlement of his/her equity and settlements are allocated according to capital interests, the amount entered in Dorvinsky's capital account would be a

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First, we need to find out the total amount of capital before and after Davenport's retirement:

Total capital before retirement = $20,000 + $30,000 + $45,000 = $95,000
Total capital after retirement = $20,000 + $30,000 = $50,000

Now, we need to allocate the $40,000 withdrawal settlement according to the partners' capital interests:

Sanchez's interest = 20% of $50,000 = $10,000
Dorvinsky's interest = 30% of $50,000 = $15,000
Davenport's interest = 50% of $50,000 = $25,000

Davenport's withdrawal settlement = $40,000
Davenport's interest = $25,000

Remaining settlement = $40,000 - $25,000 = $15,000

Now, we need to adjust the partners' capital accounts for the allocation of the remaining settlement:

Sanchez's capital account = $20,000 + $10,000 = $30,000
Dorvinsky's capital account = $30,000 + $15,000 = $45,000 + $3,000 (Dorvinsky's share of the remaining settlement) = $48,000
Davenport's capital account = $45,000 - $25,000 = $20,000

Therefore, the amount entered in Dorvinsky's capital account would be a $3,000 credit.

After Closing the Temporary Owners' Equity Accounts into Income Summary