On 1 July,Herb Block Purchased the Partnership Interest of James

Multiple Choice

On 1 July,Herb Block purchased the partnership interest of James Steinfort for $40 000.The balance in Steinfort's capital account prior to the purchase was $32 000.How will this transaction be reflected on the partnership's books?

A) Partnership will debit cash for $8 000 and credit Block's account for $40 000.
B) Partnership will close out Steinfort's capital account for $32 000 and will open up a new capital account for Block in the same amount.
C) No entries will be made by the partnership because the purchase is a personal transaction between the two persons and does not involve the partnership books.
D) Partnership will close out Steinfort's account for $32 000,open Block's account for $40 000 and record a gain of $8 000.