ter closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' rawing accounts, assume the partners' capital accounts had credit balances as follows: Rhodes, $40,000; Serrata, $60,000; Shepard, 75,000. Partners share profits and losses as follows: Rhodes, 20%; Serrata, 30%; and Shepard, 50%. If Shepard retired and withdrew 85,000 in settlement of his equity and settlements are allocated according to capital interests, the amount entered in Rhodes' capital ccount would be a Da. $4,000 debit. Ob. $4,000 credit. Oc. $6,000 debit. Od. $6,000 credit.
ter closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' rawing accounts, assume the partners' capital accounts had credit balances as follows: Rhodes, $40,000; Serrata, $60,000; Shepard, 75,000. Partners share profits and losses as follows: Rhodes, 20%; Serrata, 30%; and Shepard, 50%. If Shepard retired and withdrew 85,000 in settlement of his equity and settlements are allocated according to capital interests, the amount entered in Rhodes' capital ccount would be a Da. $4,000 debit. Ob. $4,000 credit. Oc. $6,000 debit. Od. $6,000 credit.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:**Transcription for Educational Purposes:**
**Scenario Analysis: Allocation of Capital Accounts**
After closing the temporary owners' equity accounts into the Income Summary, and after allocating the net income and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows: Rhodes, $40,000; Serrata, $60,000; Shepard, $75,000. Partners share profits and losses as follows: Rhodes, 20%; Serrata, 30%; and Shepard, 50%. If Shepard retired and withdrew $85,000 in settlement of his equity and settlements are allocated according to capital interests, the amount entered in Rhodes' capital account would be:
- A. $4,000 debit.
- B. $4,000 credit.
- C. $6,000 debit.
- D. $6,000 credit.
**Answer Explanation:**
The problem presents a scenario of profit and loss allocation among partners when one of the partners retires and withdraws their equity from the firm. The focus here is on understanding how the withdrawal affects the existing balances in the capital accounts of the remaining partners, particularly Rhodes.
The question lists four potential impacts on Rhodes' account, requiring a deep understanding of partnership capital allocation and accounting practices.
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