Question

Smith, Brown and Easton (S, B & E) are partners with capital balances of $6 000, $4 000 and $2 000 respectively and S, B &E share profits 50 per cent, 25 per cent and 25 per cent respectively.

The partners have decided to liquidate the partnership and sell the non-cash assets for a $10 000 loss. After the loss is allocated the balances in each of the partners’ capital accounts will be (rounded to the nearest dollar):

Smith = Credit $909; Brown = Credit $727; Easton = Credit $363
		Smith = Credit $667; Brown = Credit $667; Easton = Credit $667
		Smith = Credit $1 000; Brown = Credit $1 500; Easton = Debit $500
		Smith = Credit $2 000; Brown = Credit $1 000;  Easton = Debit $1 000

Answer 1

Answer

• Correct Answer is Option #3:
  Smith = Credit $1 000; Brown = Credit $1 500; Easton = Debit $500
• Working for above answers

	Smith	Brown	Easton
Capital balance	$6,000	$4,000	$2,000
Allocation of Loss of $ 10,000 in profit sharing ratio	($5,000)	($2,500)	($2,500)
After allocation, Capital balances	$1,000	$1,500	($500)
	Credit	Credit	Debit