Accounting Midterm Exam ACG-2011: Question 12

Sam, Bart, and Lex are dissolving their partnership. Their partnership agreement allocates each partner 1/3 of all income and losses. The current period's ending capital account balances are Sam, $45,000; Bart, $37,000; and Lex, $(5,000). After all assets are sold and liabilities are paid, there is $77,000 in cash to be distributed. Lex is unable to pay the deficiency. The journal entry to record the distribution should be:

	Debit Sam, Capital $45,000; debit Bart, Capital $37,000; credit Lex, Capital $5,000; credit Cash $77,000.
	Debit Sam, Capital $42,500; debit Bart, Capital $34,500; credit Cash $77,000.
	Debit Cash $77,000; credit Sam, Capital $25,667; credit Bart, Capital $25,667; credit Lex, Capital $25,666.
	Debit Sam, Capital $25,667; debit Bart, Capital $25,667; debit Lex, Capital $25,666; credit Cash $77,000.
	Debit Cash $77,000, debit Lex, Capital $5,000, credit Sam, Capital $45,000, credit Bart, Capital $37,000.

		Capital
	Cash	Sam	Bart	Lex
	$77,000	$45,000	$37,000	$(5,000)
Allocate deficiency		(2,500)	(2,500)	5,000
Allocate cash	(77,000)	(42,500)	(34,500)	0