The capital account balances and profit and loss sharing ratios of the Byd, Box, Dar, and Fus partnership on December 31, 2011, after closing entries are as follows:
Byd (30%) ..... $ 30,000
Box (20%) ..... 25,000
Dar (40%) ...... 25,000
Fus (10%) ...... 20,000
Total capital ..... $100,000
Box is retiring from the partnership, and the partners agree that he will receive a cash payment of $35,000 in final settlement of his interest. The book values of partnership assets and liabilities are equal to fair values, except for a building with a book value of $15,000 and a fair value of $25,000.
REQUIRED
1. Prepare the journal entry or entries to record Box’s retirement assuming that assets are revalued to the basis implied by the excess payment to Box.
2. Prepare the journal entry or entries to record Box’s retirement assuming the bonus approach is used.