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Flashcards in Partnership Accounting Deck (4)
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How are capital contributions with a mortgage attached recorded in a partnership for financial statement purposes?

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


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


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

Using the goodwill method: New Contribution / New Equity % : Partnership Value Implied Value of Partnership - Capital Accounts of all partners : Goodwill to Old Partners Under the Goodwill Method - the new Partner is paying an amount for a certain percentage stake in the partnership. For instance if they pay $1000 for a 25% stake - then it is assumed that the Partnership is worth $4 -000 ($1 -000/25%)


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.