Farrell and Jimmy enter into a partnership agreement on May 1,2017.Farrell contributes $50,000 and Jimmy contributes $150,000 as their capital contributions.They decide to share profits and losses in the ratio of their respective capital account balances.The net loss for the year ended December 31,2017 is $40,000.The capital account of Farrell should be ________ with the amount of loss.
A)debited
B)credited
C)increased
D)halved

Question

Quizplus · Accepted Answer

Since the partnership is sharing profits and losses in the ratio of their respective capital account balances, and the net loss for the year is $40,000, Farrell's capital account balance should be debited by $10,000 (which is $50,000 / $200,000 x $40,000) to reflect his share of the loss. Therefore, the correct answer is choice letter A.

Farrell and Jimmy Enter into a Partnership Agreement on May