The balance sheet of Ryan and Peter firm as on December 31, 2014, is given below. Ryan and Peter share profits in the ratio 3:2. They have decided to liquidate the partnership with immediate effect. They sold the furniture and equipment for $70,000. Which of the following is the correct journal entry for the sale transaction?

Question

The balance sheet of Ryan and Peter firm as on December 31, 2014, is given below.  Ryan and Peter share profits in the ratio 3:2. They have decided to liquidate the partnership with immediate effect. They sold the furniture and equipment for $70,000. Which of the following is the correct journal entry for the sale transaction?

Quizplus · Accepted Answer

The sale of furniture and equipment is a disposal of assets, which means it needs to be recorded in the accounting records. Since the sale is on credit, the accounts involved are Furniture and equipment account and the Buyer's account. The buyer's account will be debited since it is our receivable, and the furniture and equipment account will be credited to show its disposal.

B is the correct entry because it matches the explanation above. A has the wrong account debited, C has the wrong account credited, and D has the wrong amount credited.

The Balance Sheet of Ryan and Peter Firm as on December