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 is paid $40,000 for his equity is:

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 is paid $40,000 for his equity is:

Quizplus · Accepted Answer

According to the information given, the partners have agreed not to revalue the assets upon Edison's retirement, so his withdrawal amount will be equal to his capital balance, which is $40,000. The journal entry to record Edison's withdrawal should debit Edison's capital account for $40,000 and credit cash for the same amount. There is no need to adjust the capital balances of the remaining partners, so choices A, B, D, and E can be eliminated. Therefore, the correct answer is choice C.

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