Partnership Accounting

Question 1

FAR

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

Answer 1

Calculating the capital balance when property contributed has a mortgage results in the FV of the Asset being netted against the Liability

Question 2

FAR

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

Question 3

FAR

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

Answer 3

Fair Value for assets contributed.

Present value of remaining cash flows for liabilities assumed.