At 12/31/08, the Equity Section on the B/S prepared by the prior accountant had the following entries:
Additional Paid In Capital 22,658.53
Common Stock 20.00
Treasury Stock (50,000.00)
The surviving partner, my client, paid the prior partner $50,000 out of company funds for her share of the stock.
I think you're on to something here. I'm thinking about this in a new way. The treasury stock should have been purchased back with the receivable owed by partner to the company. Instead, she received cash. Stupid. Stupid. Stupid.
I'm thinking the surviving partner is going to end up recognizing that receivable as a dividend.
Any additional thoughts?
Las Vegas, NV