Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 14, Problem 1UTI
To determine
Introduction:
Expert Solution & Answer
Explanation of Solution
Given: 30% interest in partnership is sold to an incoming partner for 30% of existing capital balances.
Explanation: In such a situation, incoming partner contributes to existing partner in return of their share i.e., a new partner deals directly with an existing partner/partners. Following are two major concerns admitting of new partner:
- The transaction doesn’t take place between the partnership firm and new partner. Instead, it is between new partner and existing partner/partners.
- The consideration given by new partner may not be a reliable indicator for valuation of existing parter’s share in partnership. There exist a high possiblity that less consideration is paid for an existing partner’s share with high value.
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Students have asked these similar questions
A partnership is considering selling a 30% interest in the partnership to an incoming partner for 30% of the existing capital balances. What concerns might you have with this proposal?
Required1. Given the stated fair values, if Rowe were to sell one-half of her interest in capital to someone outside the partnership, what would be a suggested asking price?
2. Given the stated fair values, if a third party were to convey assets to the partnership in exchange for a 40% interest in the partnership, what would the value of those assets have to be?
3. Assume a new partner was admitted to the partnership with a 40% interest in capital in exchange for a cash contribution of $60,000. What would Rowe’s capital balance be as a result of this transaction, assuming use of the bonus method?
4. Given the facts of (3) above, what would Rowe’s capital balance be, assuming use of the goodwill method?
5. Assume a new partner was admitted to the partnership with a 30% interest in capital in exchange for a contribution of $55,000 of net tangible assets. What would the new partner’s capital balance be as a result of this transaction, assuming use of the bonus method?
Under the bonus method, when a new partner is admitted to the partnership, the total capital of the new partnership is equal to what formula?
Chapter 14 Solutions
Advanced Accounting
Ch. 14 - Prob. 1UTICh. 14 - Prob. 2UTICh. 14 - Prob. 3UTICh. 14 - Prob. 4UTICh. 14 - Prob. 2ECh. 14 - Prob. 3ECh. 14 - Prob. 4.1ECh. 14 - Prob. 4.2ECh. 14 - Prob. 4.3ECh. 14 - Prob. 4.4E
Ch. 14 - Prob. 4.5ECh. 14 - Prob. 5.1ECh. 14 - Prob. 5.2ECh. 14 - Prob. 6ECh. 14 - Prob. 7.1ECh. 14 - Prob. 7.2ECh. 14 - Prob. 7.3ECh. 14 - Prob. 7.4ECh. 14 - Prob. 8.1ECh. 14 - Prob. 8.2ECh. 14 - Prob. 8.3ECh. 14 - Prob. 9.1ECh. 14 - Prob. 9.2ECh. 14 - Prob. 9.3ECh. 14 - Prob. 9.4ECh. 14 - Prob. 14.2.1PCh. 14 - Prob. 14.2.2PCh. 14 - Prob. 14.2.3PCh. 14 - Prob. 14.2.4PCh. 14 - Prob. 14.2.5PCh. 14 - Prob. 14.2.6PCh. 14 - Prob. 14.2.7PCh. 14 - Prob. 14.2.8PCh. 14 - Prob. 14.2.9PCh. 14 - Prob. 14.3.1PCh. 14 - Prob. 14.3.2PCh. 14 - Prob. 14.3.3PCh. 14 - Prob. 14.3.4PCh. 14 - Prob. 14.3.5PCh. 14 - Prob. 14.3.6PCh. 14 - Prob. 14.5PCh. 14 - Prob. 14.6PCh. 14 - Prob. 14.7P
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- 2022 1. In the absence of other relevant data, when a new partner is admitted in an existing partnership through the acquisition of capital interest of incumbent partners, which is always true? Group of answer choices a. The partnership shall recognize goodwill arising from the admission of a new partner. b. The total capital of the partnership will not change despite the admission of a new partner. c. The partnership shall recognize gain or loss as a result of the disposal of capital interest. d. The total assets of the partnership will increase by the amount of the net proceeds of the disposal of capital interest. 2. In preparing the schedule of safe payments, it is assumed that: Group of answer choices a. Unpaid liabilities will be settled by the partners own personal property b. No liquidation expenses will be settled. c. All partners are solvent d. All non-cash assets are considered worthlessarrow_forwardAssume that the assets and liabilities are fairly valued on the balance Sheet and the partnership decides to admit Mac as a new partner, with a 20% interest. No goodwill or bonus is to be recorded. How much Mac should contribute in cash or other assets? (Please Refer to the Image Uploaded)arrow_forward3 When the investment of a new partner into the partnership exceeds his/her initial capital credit, there is: Group of answer choices Bonus from the new partner to the old partners Cannot be determined based on the given Partnership revaluation Bonus from the old partners to the new partnerarrow_forward
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