Marko,Billy,and Jellian are liquidating their partnership.They have no agreement for sharing profits and losses.The ending capital account balances are Marko,$13,000; Billy,$13,000; Jellian,($2,000).There is $24,000 in cash to be distributed to the partners.The journal entry to record the distribution should be:

Question

Quizplus · Accepted Answer

The total capital in the partnership is $24,000 ($13,000 + $13,000 - $2,000 = $24,000), and this is the same amount as the cash to be distributed. Since there is no agreement on how to share the profits and losses, the partnership will be liquidated based on the capital account balances. Each partner will receive their respective capital account balance, so Marko and Billy will each receive $13,000, and Jellian will receive -$2,000 (which means he owes the partnership $2,000). To record the distribution, we need to debit the individual partner capital accounts for their respective balances and credit Cash for the total distribution amount of $24,000. Therefore, the correct journal entry is:

Debit Marko, Capital $13,000 
Debit Billy, Capital $13,000 
Debit Jellian, Capital ($2,000) 
Credit Cash $24,000

Marko,Billy,and Jellian Are Liquidating Their Partnership