Question

Lewis, Zapata, and Fowler share equally in net income and net losses. After the partnership sells all assets for cash, divides the losses on realization, and pays the liabilities, the balances in the capital accounts are as follows: Lewis, $73,500 Cr.; Zapata, $41,000 Cr.; Fowler, $17,000 Dr.
a. What term is applied to the debit balance in Fowler's capital account?
b. What is the amount of cash on hand?
c. Journalize the transaction that must take place for Lewis and Zapata to receive cash in the liquidation process equal to their capital account balances.

Answer 1

Answer:

a. What term is applied to the debit balance in Fowler's capital account?

Debit Balance of Capital Account of Fowler's means Fowler overdrawn his balance from the amount he was entitled to. It also means he owes to other partners Lewis and Zapata.

b. What is the amount of cash on hand?

Amount of cash in Hand is $97,500 ( $73,500 + $41,000 - 17,000 ).

c. Journalize the transaction that must take place for Lewis and Zapata to receive cash in the liquidation process equal to their capital account balances.

                                     Dr.            Cr.

Lewis                       $73,500

Zapata                     $41,000

Cash                                          $97,500

Fowler                                        $17,000