FAR - Partnership Accounting Flashcards
How are capital contributions with a mortgage attached recorded in a partnership for financial statement purposes?
“Calculating the capital balance when property contributed has a mortgage results in the FV of the Asset being netted against the Liability
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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.”