Shannon,Thomas,and Williman are in a partnership that is being dissolved.The stated ratios of Shannon,Thomas,and William are 3:3:4,respectively.The partnership's assets are sold at a loss of $240,000.Which of the following is correct?
A)Shannon's Capital account will be credited for $72,000.
B)William's Capital account will be debited for $96,000.
C)The Loss from Realization will be debited for $240,000.
D)All of these choices.

Question

Quizplus · Accepted Answer

Since the assets were sold at a loss of $240,000, the partnership will have to absorb this loss. The loss will be shared among the partners in their capital accounts based on their profit sharing ratio. William's profit sharing ratio is 4 out of the total ratio of 10, which means he is responsible for 40% of the loss. Therefore, William's capital account will be debited for $96,000 (40% of $240,000). Shannon and Thomas will also have their capital accounts debited for $72,000 each (30% of $240,000) in order to absorb the remaining loss. Option A is incorrect because Shannon's capital account will be debited, not credited. Option C is incorrect because the loss will be debited to the capital accounts of the partners, not to a separate loss account. Option D is incorrect because only option B is correct.

Shannon,Thomas,and Williman Are in a Partnership That Is Being Dissolved