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) \[\begin{array} { | r | l | l | }
• \hline \text { Paulson, capital } & 110,000 & \\
• \hline \text { Cash } & & 110,000 \\
• \hline
• \end{array}\]

Distinguish between temporary and long-term investment strategies and their respective accounting treatments.

Understand how dividends received from investments impact the carrying amount of the investment.

Identify the conditions under which consolidated financial statements are prepared.

Recognize the accounting implications of buying and selling bonds before their maturity date.

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Definitions:

Supplier

An individual or company that provides goods or services to another entity, typically as part of a supply chain.

Venture Capitalist

An investor who provides capital to startup companies and small businesses with perceived long-term growth potential in exchange for equity or an ownership stake.

Institutional Investors

Institutional investors are organizations such as pension funds, insurance companies, and mutual funds that invest large sums of money in securities and assets.

Angel Investor

A wealthy individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.