Wallace and Simpson Formed a Partnership with Wallace Contributing $60,000

Multiple Choice

Wallace and Simpson formed a partnership with Wallace contributing $60,000 and Simpson contributing $40,000. Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. Wallace sold one-half of his partnership interest to Prince for $55,000 when his capital balance was $78,000. The partnership would record the admission of Prince into the partnership as:

A) Debit Wallace, Capital $30,000; credit Prince, Capital $30,000.
B) Debit Wallace, Capital $55,000; credit Prince, Capital $55,000.
C) Debit Prince, Capital $55,000; credit Wallace, Capital $55,000.
D) Debit Wallace, Capital $39,000; credit Prince, Capital $39,000.
E) Debit Wallace, Capital $39,000; debit Cash $16,000; credit Prince, Capital $55,000.