Teri, Doug, and Brian are partners with capital balances of $20,000, $30,000, and $50,000, respectively. They share income and losses in the ratio of 3:2:1. Revenue accounts for the period total $350,000. Expense accounts for the period total $380,000. The revenue and expense accounts are closed to the capital accounts. Doug withdraws from the partnership. How much cash does he receive upon withdrawal?

A) $30,000
B) $20,000
C) $40,000
D) $24,000

Question

James Azaeta · Accepted Answer

Final Answer : B, Explanation :  First, we need to calculate the net income by subtracting the expenses from the revenue:$350,000 - $380,000 = -$30,000 (a loss for the period)Next, we need to allocate the net loss to the partners based on their profit-sharing ratio:Teri: ($30,000 x 3/6) = -$15,000Doug: ($30,000 x 2/6) = -$10,000Brian: ($30,000 x 1/6) = -$5,000Teri's new capital balance is:$20,000 - $15,000 = $5,000Doug's new capital balance is:$30,000 - $10,000 = $20,000Brian's new capital balance is:$50,000 - $5,000 = $45,000Since Doug is withdrawing from the partnership, he is entitled to his new capital balance of $20,000. Therefore, the answer is (B) $20,000.

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