Admission of a New Partner

Question 1

Contribution of Assets to An Exisiting Partner

Answer 1

DR: Old Partners Capital
CR: New Partners Capital

Question 2

Bonus Method

Answer 2

1) Calculate New Partnership Book Value (Original Partnership + New Partner Investment) x Book Value
2) Calculate New Partner’s Interest (% of New Partnership Book Value)
3)Calculate Bonus (New Partner Investment - New Partner’s Interest)
4) Share the bonus amongst OLD partner’s capital in old P/L ratio (CR: Old Partner’s Capital with bonus)

Question 3

GoodWill Method

Answer 3

1) Calculate Implied Capital (New Partner Investment / Percentage Interest Aquired)
2) Calculate Partnership Book Value (Original Partnership@FMV + New Partner Interest x BV
3) Goodwill = Implied Capital - New Partnership BV
4) Share Good will amognst OLD partners in OLD P/L (CR: Old partners capital with positive goodwill)

Question 4

Sell Interest to Another Partner

Answer 4

DR: Capital (Retiree)
CR: Capital Remaining Partners