A Summary Balance Sheet for the Ash, Brown, and Curly

question 30

Essay

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.

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Definitions:

Elastic Demand

A type of demand that responds significantly to changes in price, where a slight price change leads to a substantial change in the quantity demanded.

Marginal Cost

The cost increase associated with the creation of one additional unit of a good or service.

Profit Maximizing

The process by which a firm determines the price and output level that returns the greatest profit.

Marginal Revenue Curve

A graphical representation that shows the change in total revenue for every unit increase in the quantity of output sold.