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Sagot :
Answer and Explanation:
The journal entry to record the distribution is as follows;
But before that following calculations need to be required
Capital, Henry = $45,000
Capital, Luther = $37,000
Capital, Gage = -$5,000
Now there is a deficiency in the gage capital account i.e. $5,000 should be borne by Henry and Luther in equal ratio i.e. $2,500 each
Now the henry final balance is
= $45,000 - $2,500
= $42,500
And, the luther final balance is
= $37,000 - $2,500
= $34,500
Now the journal entry is
Henry, capital $42,500
Luther, capital $34,500
To Cash $77,000
(Being distribution is recorded)
here the capital account is credited as it reduce the stockholder equity and cash is credited as it also reduced the assets
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