Flashcards in Partnership Accounting Deck (5)
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.