 Hello, in this lecture we're going to work some smaller test type questions, questions that could be small enough to fit on multiple choice type questions. So here we have A, B, and C are partners dissolving the partnership. The partnership agreement allocates income and loss equally among the partners. The current periods ending capital account balances are A has 15-4, B has 15-4, C has a negative balance in the capital account of 2,400. Most of all the assets are sold and the liabilities are paid, but before any contributions to cover any deficiencies, there's 28-4 in the cash to be distributed. C pays 2,400 to cover the deficiency in the account, the journal entry to record the final transaction would be what? So there's a couple ways you can kind of think about this. A lot of people think about it in terms of a table. If you put the trial balance in there, you could see the, you know, the debits and credit. And in both ways here, what they're saying is they're going to liquidate the partnership meaning dissolve it and take the cash out and leave. And if we look at the trial balance, they're basically saying, hey, in the trial balance they have cash of 28-4 and we have A, B, and C are the owners. And there's nothing left except cash because they sold everything else. They did it properly. They, you know, they sold all their assets, they paid all their liabilities. Now all they have is cash in the capital balances, meaning the capital balances are 1-5-4-0-0, and we have 1-5-4-0-0, I'm putting a credit with negative numbers. And then we have a debit balance here. So if we looked at it in terms of debits and credits, cash is a debit, credit to the capital account, credit to the capital account, a negative capital account which has this negative balance. And if we sum that up, then we would have the debits minus the credits like so and that would equal zero. So we would, that's basically what we're seeing in balance. If we looked at it in terms of a table, we can say that we have cash here and we've got A, B, and C and the cash equals the 28-4 and we have A is 15-4, we have B 15-4 and we have C negative 2-4-0-0 and kind of like if we look at the accounting equation on that then the total of the equity section, A, B, and C, is going to be equal to the cash. Now the problem here is that C owes the company money. So the question is, is C going to pay the company like they should before the distribution happens because that C owes the money back. So if that happens, that's great, then C would pay the company meaning cash would go up by 2-4-0-0 which is what they're saying happened and this capital account balance would go down by 2-4-0-0. So in terms of a table, that would mean that we'd have 28-4 in cash plus the new cash that was put in not being distributed to the partners and of course C's equity account would be this plus this which makes it go down plus a negative number 2-0. So C doesn't have any capital, A still has that, B still has that. If we add up the equity side then again we're equal to cash. This is kind of like the accounting equation. Assets equal to liabilities which we don't have any and equity. So assets equal liability and equity. If we look at it in terms of like a trial balance then if this was the adjustment column we would say that cash went up with a debit of 2-4-0-0 and so the ending balance then would be the 28-4 plus the 2-4-0-0 and this capital account went down with a credit because C put money in reduced and so we're going to say this equals 2-4-0-0 or it actually goes up to zero in terms of credit balance plus the credit and there we have that and if we pull over the other numbers then this is the ending balance. So this is the beginning trial balance, here's our adjustment, here's the ending trial balance and of course it's still in balance. So the journal entry is in balance, ending balance is in balance meaning cash equals the equity accounts, debits equal the credits. So now then we can make the journal entry to basically close this out and we can see that there's cash if we look at it in the trial balance or if we look at it in the table the cash has a debit balance of 30,800 we need to credit cash so I'm going to credit cash and I'm going to put that over here. I'm going to represent the credit with a negative and that's going to be 3-8-0-0 and then 3-0-8-0-0 and I'm going to make it a credit with a negative number and then we're going to debit A and B's capital accounts. So A and B's capital accounts are here and we're going to say that we're going to just debit whatever's left and that's going to be the 15-4 and the 15-4 so the debits equal the credits. Now if we looked at that in terms of a table I'm going to scroll down just we don't need the data anymore so I'm going to scroll down like this I'm going to pull this down a bit that's our journal entry, pull this down. Now if we looked at that in terms of a table then of course the cash is going down to zero 30,800 we don't really see the debits and credits here. The A is going to go down to zero 15-4 capital account 15-4 B is going to go down to zero and C didn't have anything in there in the first place and that of course makes everything go to zero that closes out the company. If we looked at it in terms of the journal entry if we had this as our journal entry I'm going to pull this down here and if we're saying that we ended at this point and then we're going to record obviously this journal entry then we're going to credit cash I'm going to say the cash is going to be credited so I'm just going to say that's the credit there and then we're going to debit this and we're going to debit this so the ending if this was where we started and this is our new transaction we're going to say this is this plus this goes to zero this is this plus this goes to zero and this is this plus this goes to zero so now they have liquidated and A and B have left the company with 15-4 each C doesn't get anything because C actually owed the company the partnership in this case money. Lechman says that A is a partner in a partnership an analysis of a capital account indicates that during the most recent year she withdrew 25,000 from the partnership. Her share of the partnership's net loss people were lost not income was 1,800 and she made an additional equity contribution of 15,000 her capital count ended at 155,000 what was her capital balance at the beginning of the year this is a typical kind of multiple choice type or small type question in that they're making us back into a number which in real life we normally would be known and we would back into the ending balance but it's good for test taking purposes to test the knowledge so normally i would put this into our normal calculation and then figure out the formula so usually when we try to figure out the capital balance we have the beginning balance and that's the unknown so i'll make it yellow we don't know that which we normally would and then everything else that happened on a capital account indicates that the most she withdrew so draw draws normally would decrease because that would decrease the amount that the company that the business or the partnership in this case owes to her so that would be in 25,000 so whatever that first number is minus 25,000 uh her share of the partnership net loss now there wasn't income it was a loss if it was income it would increase the capital balance but in this case it was a net loss therefore her share of the loss 15,8,5 decreasing whatever that beginning balance is she made an additional equity contribution so she actually put more money in she drew money out and put money in that's kind of unusual hopefully we draw and not put money in but we had both things happen we contribute another 15,000 and then they told us what the ending balance is which is usually what we figure out so the ending balance they told us was 155,000 that is normally what we would calculate so i'm going to underline this so if we think about the formula then it's what is this minus this minus this plus this should equal that so i mean if we wrote that out algebraically it would be 155 well let's do it this way i'm just gonna say x minus 25,000 minus 18,5 plus 15,000 would then equal this 155,000 and then we could we could of course solve for this these are all on the same side so we could add those up so if we added these three up it adds up to 28,5 or if we took the calculator here we'd say it's i'm going to take the positive number first it's the 15,000 minus the 25,000 minus 18,5 is 28,5 negative so if we we wrote that then of course we would have x minus the what did i say was 28,5 28,5 negative and we're going to say equals the 155,000 and then of course now we have we're going to subtract from both sides or add to both sides this 28,5 so if i add 28,5 to this side and 28,5 to that side we end up with x is going to equal and then we have the 155,000 plus the 28,5 which is 18,35 so i'm going to say 18,35 and then we could test this i'm going to pull this over here i'm going to say okay let's pull this over here and say um what if we put in this 18,35 and then have these numbers the same and then sum this up and see if the normal calculators it would be this plus the i mean minus this minus this plus this that's what our sum function is doing and we get the 155 so it looks correct there uh if you want to just kind of do it a little bit quicker than to have this formula you might try to think about it like this way you'd say okay you know this and then all these things so what if i just combine these into one number so if we summed these up it would be the sum of these three numbers and then we still have this unknown x which i'll i'll just make yellow again and then we know that this ending number and so then we can kind of think well uh you know this is a it's it's this minus this equals that so in order to back into this it's either going to be a subtraction or an addition problem you can try either one we can say this plus this and uh that can't work because this minus this does not equal that well let's try this minus this and okay this minus this then equals it so you can kind of test it that way if you just combine these numbers without writing in out algebraically in this format and solving it for it algebraically i mean if you break it down you basically break it down to three numbers and then just kind of use some reason and some trial and error to get the number might be a bit quicker