Wallace, Simpson, and Prince Are Partners and Share Income and Losses

question 95

Multiple Choice

Wallace, Simpson, and Prince are partners and share income and losses in a 3:4:3 ratio. The partnership's capital balances are Wallace, $68,000; Simpson, $90,000; and Prince, $42,000. Royal is admitted to the partnership on July 1 with a 20% equity and invests $50,000. The partnership would record the admission of Royal into the partnership as:

• A) Debit Cash $20,000; credit Prince, Capital $20,000.
• B) Debit Cash $50,000; credit Royal, Capital $50,000.
• C) Debit Cash $40,000; debit Wallace, Capital $3,000; debit Simpson, Capital, $4,000; debit Prince, Capital $3,000; credit Royal, Capital $50,000.
• D) Debit Cash $50,000; credit Simpson, Capital $10,000, credit Royal, Capital $40,000.
• E) Debit Wallace, Capital $15,000; debit Simpson, Capital, $20,000; debit Prince, Capital $15,000; credit Royal, Capital $50,000.

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