A summary balance sheet for the Ash,Brown,and Curly partnership on December 31,2011 is shown below.Partners Ash,Brown,and Curly allocate profit and loss in their respective ratios of 2:1:1.The partnership agreed to pay partner Brown $135,000 for his partnership interest upon his retirement from the partnership on January 1,2012.The partnership financials on January 1,2012 are:
Required:
Prepare the journal entry to reflect Brown's retirement from the partnership:
1.Assuming a bonus to Brown.
2.Assuming a revaluation of total partnership capital based on excess payment.
3.Assuming goodwill equal to the excess payment is recorded.
Definitions:
Stock Dividends
A payment to shareholders in the form of additional shares of stock rather than cash.
Paid-in Capital
Funds raised by a company through the sale of its equity securities, excluding any par value of the shares.
Retained Earnings
The portion of net earnings not distributed as dividends to shareholders but retained by the company for reinvestment or debt payment.
Stock Dividend
A dividend payment made in the form of additional shares rather than a cash payout, increasing the total number of shares owned.
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