F10

Question 1

What is the difference between the bonus and the goodwill method to credit existing partner’s capital accounts when a new partner purchases an interest?

Answer 1

Goodwill is based on the difference between the implied value of the partnership and what the new partner paid, the bonus is based on the total equity with new partner’s contribution x the partnership interest percentage.

Question 2

What is the difference between using the goodwill or method bonus method to account for partner retirement?

Answer 2

The bonus method does not change total net assets of the partnership but decreases the capital accounts, goodwill is booked for the difference and increases partner’s capital accounts and net assets.

Question 3

How to calculate annual accretion expense for an ARO?

Answer 3

Beg FV of ARO x credit adjusted risk-free interest rate

Question 4

when is a note payable disclosed as a contingent liability?

Answer 4

When it is WITH recourse.

Question 5

what is the interest expense for a note payable/receivable?

Answer 5

if non-interest bearing or low rate then rate is imputed (effective interest rate), otherwise take face amount time the state rate and divide by number of payment periods.

Question 6

what is the installment sales method?

Answer 6

where the carrying value is discounted by the interest rate