Simonsen,Paulson,and Richardson are partners in a firm with the following capital account balances:

Paulson is retiring from the partnership on December 31,2017.The profit-and-loss-sharing ratio among Simonsen,Paulson,and Richardson is 1:3:2,in the order given.Paulson is paid $100,000 cash in full compensation for her capital account balance.Which of the following journal entries would the firm record for this transaction?

Question

Simonsen,Paulson,and Richardson are partners in a firm with the following capital account balances:

Paulson is retiring from the partnership on December 31,2017.The profit-and-loss-sharing ratio among Simonsen,Paulson,and Richardson is 1:3:2,in the order given.Paulson is paid $100,000 cash in full compensation for her capital account balance.Which of the following journal entries would the firm record for this transaction?

Quizplus · Accepted Answer

B)The withdrawing partner may be so eager to depart that he or she will take less than his or her full capital balance.Paulson withdraws from the business and agrees to receive cash of $100,000.This settlement is $80,000 less than Paulson's capital account balance.The remaining partners (Simonsen and Richardson)share this $80,000 difference according to their existing profit-and-loss-sharing ratio (1:2).

Simonsen,Paulson,and Richardson Are Partners in a Firm with the Following