F2M8

Question 1

Purchase or sale of existing partnership

Answer 1

outside partnership transaction

no journal entry

Question 2

Formation of a partnership

Answer 2

assets reported at FV

Question 3

Exact method - Partnerships

Answer 3

book value is the amount of the new partner’s share

Question 4

Bonus method - partnerships

Answer 4

bonus either allocated to new member (paying less than value) or to old members (paying more than value)

Question 5

Goodwill method - partnerships

Answer 5

the discount or premium is allocated between the old partners

difference between the implied and book value

Question 6

How to determine values for partners

Answer 6

profit and loss

NOT capital balance

Question 7

Bonus method withdrawl of partner

Answer 7

1. asset adjustment to FV

2. pay off withdrawing partner ONLY

Question 8

Goodwill method Withdrawl of partner

Answer 8

1. asset adjustment to FV
2. disburse goodwill to all partners
3. pay off partner

Question 9

Order of payout in liquidation of partners

Answer 9

1. creditors (including partners that are creditors)

2. partner’s capital

Question 10

If there is a loss on converting noncash assets, it may result in a

Answer 10

Capital deficiency

If a partner runs in the negative, other partners must pay according to their ratios