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Flashcards in Partnership Accounting Deck (5)
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How are capital contributions with a mortgage attached recorded in a partnership for financial statement purposes?

Present asset net of liability at fair vaues


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.


Computation of new partner contribution when no bonus and no goodwill are recorded

example 20% interest for new partner
700 existing partners' capital total

X = .20 (700 + x)