A Level Accounting (9706)•9706/12/O/N/19
Explanation
Retirement settlement after revaluation gain Steps:
- L's initial capital balance: $10,000.
- Add full revaluation gain to L's capital (as adjustment for retirement): 6,000 = $16,000.
- Total amount due to L: $16,000 (current account treated separately or incorporated into loan).
- Cash paid from bank: half of amount due = 8,000.
Why D is correct:
- In partnership retirement, the revaluation gain is credited to the retiring partner's capital account, making total due $16,000; half paid per settlement terms.
Why the others are wrong:
- A: Understates payment; ignores revaluation adjustment.
- B: Equals current balance only; excludes capital and revaluation.
- C: Matches revaluation gain; ignores partner's capital base.
Final answer: D
Topic: Types of business entity
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