F99- Pt1-5 Partnership Accounting

Question 1

How are capital contributions with a mortgage attached recorded in a partnership for financial statement purposes?

Answer 1

• The FV of the Asset being netted against the Liability

Question 2

If no goodwill is recorded upon admission of a new partner - which method is used for recording the new partner’s interest?

Answer 2

The Bonus method:
Old Partnership Equity+ New Partner Contribution
= New Partnership Equity
x New Partner % = New Partner Equity Amount

Question 3

If goodwill is recorded upon admission of a new partner - how is the partner’s interest recorded?

Answer 3

Using the goodwill method:
- New Contribution / New Equity % = Partnership Value

• The new Partner is paying an amount for a certain percentage stake in the partnership.

Question 4

At what value should assets contributed to a partnership be recorded? What value for liabilities assumed by the partnership?

Answer 4

Fair Value for assets contributed.

Present value of remaining cash flows for liabilities assumed.

Question 5

What is the FV of a Stock if there is NO Principal Market for the stock?

Answer 5

• The price in the most Advantageous market is the FV of the Stock.
• The market with the best price AFTER transaction costs.
• Quoted Stock Price- Transaction Cost= Net
  Whichever is highest.

Question 6

Fair Value Measurements include?

Answer 6

• Includes Transportation costs but NOT transaction costs

- The Price in the principal market for an asset or Liability will be the FV measurement.

Question 7

A change from the Cost Approach to the Market Approach of measuring FV is considered to be what type of accounting Change?

Answer 7

• Change in Accounting Estimate

Question 8

Acquiring an asset for which it will measure FV by discounting future cash flows of an asset, what type of measurement approach is this?

Answer 8

• Income Approach

Question 9

The FV for an asset or Liab. is measured as?

Answer 9

• The Price that would be RECEIVED when selling an asset or paid when transferring a Liab. in an orderly transaction betwn market participants.

Question 10

When a Partner leaves a partnership, Under the Bonus Method the Excess settlement over the Capital Balance is?

Answer 10

• Reduces the Capital Balances of other Partners.

Question 11

What are the 3 Characteristics that is used to determine the Primary Beneficiary of a Variable Interest Entity under U.S. GAAP?

Answer 11

• Obligation to absorb expected VIE losses
• Right to receive the expected VIE residual returns
• Power to direct the activities of the VIE

Question 12

What Liability is excluded from Variable interest in an Entity?

Answer 12

• Short-Term Trade Payable; A/P

Question 13

What circumstance would indicate that an entity has an insufficient level of Equity investment at risk?

Answer 13

• Entity’s equity investment at risk is LESS than the equity investment at risk of similar non-VIE entities.

Question 14

What is the calc. for Bonus to Prior Partners?

Answer 14

New Partner Contribution - New Partner Equity Amount: Bonus to Prior Partners using same allocation as P/L

Question 15

What is the Goodwill amount to Old Partners?

Answer 15

• Implied Value of Partnership - Capital Accounts of all partners= Goodwill to Old Partners