After Closing the Temporary Owners' Equity Accounts into Income Summary

question 16

Multiple Choice

After closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows: Boswell, $40,000; Aikido, $60,000; Cooke, $55,000. Partners share profits and losses as follows: Boswell, 20%; Aikido, 30%; and Cooke, 50%. If Cooke retired and withdrew $65,000 in settlement of his equity and settlements are allocated according to capital interests, the amount entered in Aikido's capital account would be a

• A) $4,000 debit.
• B) $4,000 credit.
• C) $6,000 debit.
• D) $6,000 credit.

---

Definitions:

General Partner

is a member of a partnership who has unlimited liability for the debts of the partnership and takes part in the management of the business.

Unlimited Personal Liability

A legal condition where individuals are fully responsible for all of a business's debts or liabilities without any limit, risking personal assets beyond the investment in the business.

Limited Partnership

A business partnership where at least one partner has unlimited liability and one or more partners have limited liability, not involved in daily management.

Dissolving

The process of formally ending the existence of a corporation or partnership, involving liquidation of assets and distribution of the proceeds to claimants.