A Summary Balance Sheet for the Sissy, Jody, and Buffy

question 2

Essay

A summary balance sheet for the Sissy, Jody, and Buffy partnership on December 31, 2014 is shown below. Partners Sissy, Jody, and Buffy allocate profit and loss in their respective ratios of 3:4:6. The partnership agreed to pay Buffy $360,000 for her partnership interest upon her retirement from the partnership on January 1, 2015. Any payments exceeding Buffy's capital balance are treated as a bonus from partners Sissy and Jody.
Required:
Prepare the journal entry to reflect Buffy's retirement.

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Definitions:

De Facto Corporation

A company that operates as if it were legally incorporated, even though it has not completed the necessary legal formalities and documentation.

Corporation By Estoppel

Corporation by estoppel is a legal doctrine preventing someone from denying a business's corporate status when they have treated it as a corporation in previous transactions.

Novation

In a contract, the substitution of a third party for one of the original parties. The duties remain the same under the contract, but one original party is discharged and the third party takes that original party’s place.

Implied Corporate Powers

Powers not explicitly stated in a corporation's charter or bylaws but are necessary to conduct the day-to-day operations.