The partnership shows the following capital balances at the date of Lance's withdrawal: Willow,$84,000,Lance,$38,000,and Jordan,$38,000.The partners (Willow,Lance,and Jordan) share income and loss equally.Lance withdraws and is paid $38,000 of cash.How would the partnership record the withdrawal of Lance?
A)Debit Cash for $38,000 and credit Lance,Capital for $38,000
B)Debit Lance,Capital for $38,000 and credit Cash for $38,000.
C)Debit Willow,Capital for $19,000,debit Jordan,Capital for $19,000 and credit Cash for $38,000.
D)Debit Willow,Capital for $38,000 and credit Cash for $38,000.
E)Debit Jordan,Capital for $38,000 and credit Cash for $38,000.

Question

Quizplus · Accepted Answer

Lance's withdrawal will decrease his capital balance, so Lance, Capital should be debited. The cash paid to Lance will decrease the cash balance, so Cash should be credited. Therefore, the correct entry is to Debit Lance, Capital for $38,000 and credit Cash for $38,000.

The Partnership Shows the Following Capital Balances at the Date