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 31,2017.Paulson is paid $230,000 cash in full compensation for her capital account balance.Which of the following is TRUE of the journal entry prepared at the time of retirement? (Round the final answer to the nearest dollar. )

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 31,2017.Paulson is paid $230,000 cash in full compensation for her capital account balance.Which of the following is TRUE of the journal entry prepared at the time of retirement? (Round the final answer to the nearest dollar. )

Quizplus · Accepted Answer

A withdrawing partner may receive assets worth more than the book value of his or her capital account balance.This situation creates a bonus for the withdrawing partner and a decrease in the remaining partners' capital accounts,shared in their profit-and-loss sharing ratio (1:2).
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Simonsen,Paulson,and Richardson Are Partners in a Firm with the Following