Flashcards in Partnership Accounting Deck (4)
At what value should assets contributed to a partnership be recorded? What value for liabilities assumed by the partnership?
Fair Value for assets contributed.
Present value of remaining cash flows for liabilities assumed.
How are capital contributions with a mortgage attached recorded in a partnership for financial statement purposes?
Unlike in Regulation where the partner’s tax basis is reduced by the amount of the mortgage that the other partners absorb- calculating the capital balance when property contributed has a mortgage results in the FV of the Asset being netted against the Liability
Example: If you contribute a $100-000 building with a 20-000 loan- your capital account is increased by $80-000- instead of allocating the liability to the other partners according to their ownership %.
If no goodwill is recorded upon admission of a new partner- which method is used for recording the new partner's interest?
The bonus method:
Old Partnership Equity
+ New Partner Contribution
= New Partnership Equity
x New Partner %
= New Partner Equity Amount
New Partner Contribution
- New Partner Equity Amount
= Bonus to Prior Partners using same allocation as P/L