Jabar Hassan, Mohammed Badoo, and Sanji Patel Have Capital Balances

question 4

Essay

Jabar Hassan, Mohammed Badoo, and Sanji Patel have capital balances of $ 650,000, $ 500,000, and $ 425,000, respectively, and they share profit on a 5:3:2 basis.
Instructions
Journalize the withdrawal of Sanji from the partnership under each of the following independent circumstances:
a) Sanji is paid $ 425,000 in cash from partnership assets.
b) Sanji is paid $ 450,000 in cash from partnership assets.
c) Sanji is paid $ 400,000 in cash from partnership assets.

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Definitions:

Cost Concept

An accounting principle that dictates that all assets are recorded and reported at their original purchase cost rather than their current market value.

Owner's Equity

The residual interest in the assets of a business after all liabilities have been deducted, often referred to as net assets or shareholder equity.

Assets

Resources owned by a business with future economic benefits.

Investments

The balance sheet caption used to report long-term investments in stocks not intended as a source of cash in the normal operations of the business.