Simonsen,Paulson,and Richardson are partners in a firm with the following capital account balances: The profit-and-loss-sharing ratio among Simonsen,Paulson,and Richardson is 1:3:2,in the order given.Paulson is retiring from the partnership on December 31,2018.Paulson's capital account is settled at book value.Which of the following journal entries would the firm record for Paulson's withdrawal?

Question

Simonsen,Paulson,and Richardson are partners in a firm with the following capital account balances:  The profit-and-loss-sharing ratio among Simonsen,Paulson,and Richardson is 1:3:2,in the order given.Paulson is retiring from the partnership on December 31,2018.Paulson's capital account is settled at book value.Which of the following journal entries would the firm record for Paulson's withdrawal?

Quizplus · Accepted Answer

Paulson withdraws from the partnership by receiving cash for the book value of her capital account.Paulson's capital account is now closed,and Simonsen and Richardson may or may not continue in the new partnership.If they continue,they will need to draft a new partnership agreement and determine a new profit-and-loss-sharing ratio.

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