Teri, Doug, and Brian are partners with capital balances of $20,000, $30,000, and $50,000, respectively. They share income and losses in the ratio of 3:2:1. Revenue accounts for the period total $350,000. Expense accounts for the period total $380,000. The revenue and expense accounts are closed to the capital accounts. Doug withdraws from the partnership. How much cash does he receive upon withdrawal?

Question

Quizplus · Accepted Answer

First, we need to calculate the net income by subtracting the expenses from the revenue:
$350,000 - $380,000 = -$30,000 (a loss for the period)

Next, we need to allocate the net loss to the partners based on their profit-sharing ratio:
Teri: ($30,000 x 3/6) = -$15,000
Doug: ($30,000 x 2/6) = -$10,000
Brian: ($30,000 x 1/6) = -$5,000

Teri's new capital balance is:
$20,000 - $15,000 = $5,000

Doug's new capital balance is:
$30,000 - $10,000 = $20,000

Brian's new capital balance is:
$50,000 - $5,000 = $45,000

Since Doug is withdrawing from the partnership, he is entitled to his new capital balance of $20,000. Therefore, the answer is (B) $20,000.

Teri, Doug, and Brian Are Partners with Capital Balances of $20,000