Dominic and Morgan are partners. Dominic has a capital balance of $350,000 and Morgan has a capital balance of $245,000. Morgan sells $105,000 of his ownership to Lance. Which of the following is true of the items in balance sheet?

Question

Quizplus · Accepted Answer

When Morgan sells $105,000 of his ownership to Lance, Morgan's capital balance decreases by $105,000 but Lance's capital balance increases by $105,000. Therefore, the total equity remains unchanged as the increase in Lance's capital balance offsets the decrease in Morgan's capital balance. The assets and liabilities of the business are not affected by this transaction.

Dominic and Morgan Are Partners