Partnership

Question 1

Explain two types of partneship

Answer 1

General Partneship - each partner is personally liable to the partnership’s creditor if parnership assets are not sufficient to pay such creditors

Limited Partnership - Only one partner needs to be a general partner. The remaining partner can be limited, which means that their obligations to creditors are limited to their capital contribution

Question 2

Kinds of Partneship Dissolution

Answer 2

1. Admission of a new Partner
   a. By purchase of interest
   b. By investment
2. Withdrawal or retirement of a partner
3. Death or incapacity of a partner
4. Incorporation

Question 3

Admission by Investment
Explain TCC vs. TAC and CC vs. AC

Answer 3

TCC=TAC (required!) - No adjustment

TCC Gtr than TAC - Overstatement of asset or dimunution of partnrers Capital

TCC less than TAC - unrecorded net assets or required investment in partner’s capital

CC=AC (required capital of NEW partner) - no bonus

CC grtr than AC- Bunos to old partners

CC less that AC- additional capital credit (bonus method) from the old partners —– dr. Old P Capital Cr. NEW P Capital—- bunos to new partner

Question 4

Two Types of Liquidation

Answer 4

Lump Sum Liquidation- Basic

Installment Liquidation-

Question 5

Two method for Installment liquidation and Explain

Answer 5

Schedule of Safe Payment(Long Method):
*Assume Total Loss on all remaining NCA, including Cash withheld (unrecorded UNPAID expenses, and ANTICIPATED liquidation expenses)
*Assume that partners are to be personnaly insolvent as the case maybe.

Cash Priority Program (Desirable than Safe Payment):
*Ranking of partner’s vulnerability level
*Total interest (equity) account = balance of the capital account +/- loans from/to the partners
*Loss absorption ability=Total interest account / P&L assigned Ratio
*Then Just know the priority (partner with high LAA)
*Once you get the Priority amount, DONT FORGET TO MULTIPLY TO PARTNER’S RATIO! TO GET THE PAYMENT AMOUNT!

Question 6

Installment Liquidation:
For assets that are bought by partners, must be measured at FV. And need to revalue. Further, the revaluation amount should be allocated to all Partners accoding to their PL ratios

Answer 6

T

Question 7

Schedule of safe payments assumption

Answer 7

Possible Losses:
1. Inability to dispose the remaining NCA

2. Failure of deficient partners to make additional contribution

Question 8

Please explain the Total Interest in computing Safe Payment and Cash Priority Program

Answer 8

Same.

Capital
+/- Loans
=Total Interest