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

question 10

Multiple Choice

Simonsen,Paulson and Richardson are partners in a firm with the following capital account balances: $$\begin{array} { | l | l | } \hline \text { Simonsen } & \$ 40,000 \\\hline \text { Paulson } & 170,000 \\\hline \text { Richardson } & 110,000 \\\hline\end{array}$$ Paulson is retiring from the partnership on 31 December 2017.The profit-and-loss-sharing ratio among Simonsen,Paulson and Richardson is 1:3:2,in the order given.Paulson is paid $110,000 cash in full compensation for her capital account balance.Journalise the cash payment of $110,000 to Paulson upon retirement.

• A) \[\begin{array} { | c | l | l | }
• \hline \text { Paulson, capital } & 170,000 & \\
• \hline \text { Simonsen, capital } & & 30,000 \\
• \hline \begin{array} { l }
• \text { Richardson, } \\
• \text { capital }
• \end{array} & & 30,000 \\
• \hline \text { Cash } && 110,000 \\
• \hline
• \end{array}\]
• B) \(\begin{array}{|ll|l|l|}
• \hline\text { Cash } & &170,000 & \\
• \hline& \text { Paulson, } & & \\
• \text { capital }& && 170,000\\\hline
• \end{array}\)
• C) \[\begin{array} { | c | l | l | }
• \hline \text { Paulson, capital } & 170,000 & \\
• \hline \text { Cash } & & 110,000 \\
• \hline \text { Simonsen, capital } & & 20,000 \\
• \hline \begin{array} { c }
• \text { Richardson, } \\
• \text { capital }
• \end{array} & & 40,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | r | l | l | }
• \hline \text { Paulson, capital } & 110,000 & \\
• \hline \text { Cash } & & 110,000 \\
• \hline
• \end{array}\]

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Definitions:

Straight-Line Depreciation

A technique for distributing the expense of a physical asset across its lifespan in consistent yearly increments.

Book Value

The net value of a company's assets as recorded on the balance sheet, calculated by subtracting liabilities from the total value of assets.

Adjusted Trial Balance

A trial balance prepared after adjusting entries are made, ensuring the accuracy of financial statements by balancing debits and credits.

Ledger Balance

The closing balance of an account in the ledger at a specific point in time, reflecting all transactions.