Wright, Bell, and Edison are partners and share income in a 2:5:3 ratio. The partnership's capital balances are as follows: Wright, $33,000, Bell $27,000 and Edison $40,000. Edison decides to withdraw from the partnership, and the partners agree not to revalue the assets upon Edison's retirement.
-The journal entry to record Edison's June 1 withdrawal from the partnership if Edison sells his interest to Whitney for $45,000 after the other two partners approve Whitney as partner is:
A) Debit Edison, Capital $40,000; credit Cash $40,000.
B) Debit Edison, Capital $45,000; credit Whitney, Capital $45,000.
C) Debit Edison, Capital $40,000; debit Cash $5,000; credit Whitney, Capital $45,000.
D) Debit Edison, Capital $40,000; credit Whitney, Capital $40,000.
E) Debit Edison, Capital $40,000; debit Wright, Capital $2,500; debit Bell, Capital $2,500; credit Whitney, Capital $45,000.

Question

Wright, Bell, and Edison are partners and share income in a 2:5:3 ratio. The partnership's capital balances are as follows: Wright, $33,000, Bell $27,000 and Edison $40,000. Edison decides to withdraw from the partnership, and the partners agree not to revalue the assets upon Edison's retirement. 
-The journal entry to record Edison's June 1 withdrawal from the partnership if Edison sells his interest to Whitney for $45,000 after the other two partners approve Whitney as partner is:
A) Debit Edison, Capital $40,000; credit Cash $40,000.
B) Debit Edison, Capital $45,000; credit Whitney, Capital $45,000.
C) Debit Edison, Capital $40,000; debit Cash $5,000; credit Whitney, Capital $45,000.
D) Debit Edison, Capital $40,000; credit Whitney, Capital $40,000.
E) Debit Edison, Capital $40,000; debit Wright, Capital $2,500; debit Bell, Capital $2,500; credit Whitney, Capital $45,000.

Quizplus · Accepted Answer

Edison's capital account is debited for his balance of $40,000, and Whitney's capital account is credited for the same amount, as Edison sells his interest to Whitney for $45,000, but the partnership records only the book value of $40,000.

Wright, Bell, and Edison Are Partners and Share Income in a 2:5:3