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

question 89

Multiple Choice

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?

• 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.

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Definitions:

Sales Revenue

The total amount of money generated from the sale of goods or services before any expenses are subtracted.

Profit Increase

The growth in profit from one period to another, often measured as a percentage increase, indicating the company's improved financial performance.

Cost Volume Profit Analysis

An accounting method used to determine the breakeven point of sales and to estimate the effect of changes in costs and volume on a company's profit.

Fixed Costs

Costs that do not change with the level of production or sales volume, such as rent, salaries, and insurance.