Simonset Paulson and Richardson are partners in a firm with

Simonset, Paulson, and Richardson are partners in a firm with following capital account balances: Simonsen-$50,000, Paulson- $160,000, Richardson-$100,000. The profit-and-loss-sharing ratio is 1:3:2, in the order given. Paulson is retiring from the partnership on December 31, 2013. Paulson\'s capital account is settled at book value. Journalize the cash payment to Paulson up retirement.

Solution

Journal entry for the cash payment to Paulson up retirement:

Paulson’s Capital A/c Dr. 160000

To Cash A/c 160000

(Amount paid to the retiring partner)