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.)
Simonsen, Paulson, and Richardson are partners in a firm with the following capital account
balances:
A) Debit Paulson's capital account by $230,000.
B) Debit Richardson's capital account by $35,000.
C) Debit Simonsen's capital account by $23,333.
D) Debit Income Summary by $70,000.
C) Debit Simonsen's capital account by $23,333.
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).
Capital account balance $160,000
Cash received on retirement 230,000
Bonus to retiring partner 70,000
Simonsen's share of bonus (1 / 3 × $70,000) $23,333
Richardson's share of bonus (2 / 3 × $70,000) $46,667
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