Partners S,T,and U share income and losses in a 5:3:2 ratio,respectively.S wishes to leave the partnership,so the assets are revalued and are found to be overvalued by $6,000.If each partner had a capital balance of $20,000 prior to S's notification of withdrawal,the entry to record the withdrawal of S's interest from the partnership is:
C).

Question

Quizplus · Accepted Answer

Since the assets are overvalued by $6,000, the total value of the assets is reduced by $6,000.

The remaining partners - T and U - will share the profits and losses in a 5:2 ratio, respectively.

The entry to record S's withdrawal is as follows:

Dr. S's Capital Account $20,000 
Cr. T's Capital Account $15,000 ($30,000 x 5/8) 
Cr. U's Capital Account $10,000 ($30,000 x 2/8) 
Cr. Revaluation Reserve $6,000

The credit to the revaluation reserve is to write-off the overvalued assets.

Therefore, the correct answer is B.

Partners S,T,and U Share Income and Losses in a 5:3:2