Harry,Tony,and Liza run a partnership firm.In the process of liquidation,the partnership sells non-cash assets,having a book value of $78,000,for $86,000.Which of the following is TRUE of the journal entries?
A) Cash will be credited by $8000.
B) Non-cash assets will be credited for $86,000.
C) Cash will be credited for $78,000.
D) Non-cash assets will be credited for $78,000.

Question

Quizplus · Accepted Answer

Non-cash assets with a book value of $78,000 were sold for $86,000. Therefore, the non-cash assets account will be credited for $78,000 (book value) and the difference of $8,000 will be credited to the partner's capital accounts as a gain on disposal of the assets. Thus, the journal entry will be:

Non-cash assets account (credited) $78,000
Gain on disposal of assets account (credited) $8,000
To cash account (debited) $86,000

Harry,Tony,and Liza Run a Partnership Firm