Admission of partner:changes in the membership of
To choose:the correct answer to determine contribution of new partner.
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Advanced Financial Accounting
- When a partnership dissolves, the first step in the dissolution process is to ________. A. allocate the gain or loss on sale based on income sharing ratio B. pay off liabilities C. sell noncash assets D. divide the remaining cash among the partnersarrow_forwardWhen a partnership is liquidated, any gains or losses realized by the sale of noncash assets are allocated to the partners based on their income sharing ratio. Why?arrow_forwardWhen a new partner is admitted into a partnership and the new partner receives a capital credit greater than the tangible assets contributed, which of the following explains the difference? I. The old partners' goodwill is being recognized. II. The new partner's goodwill is being recognized Select one: a. II only b. Both I and II c. Either I or II d. I onlyarrow_forward
- In the realization process for a partnership if an asset is sold for more than book value that is recorded in the accounting records, select the statement that correctly describes this transaction. O There is no journal entry required on the partnership's accounting records O There is a loss on realization O There is a gain on realization O none of the above answers What is the process called where a partnership sells the assets, pays the creditors, and distributes the remaining cash or other assets to the partners? O rearranging O liquidation O refinancing O none of the above answersarrow_forwardChoose the correct. If a partnership is liquidated, how is the final allocation of business assets made to the partners?a. Equally.b. According to the profit and loss ratio.c. According to the final capital account balances.d. According to the initial investment made by each of the partners.arrow_forwardWhen a partnership dissolves, the first step in the dissolution process is to ________.A. allocate the gain or loss on sale based on income sharing ratioB. pay off liabilitiesC. sell noncash assetsD. divide the remaining cash among the partnersarrow_forward
- Which of the following statements is correct? Options: Each partner has the authority to enter into contracts which are binding upon the partnership A majority consent of all the partners is necessary when admitting a new partner The final distribution of cash to the partners in liquidation shall be made based on their profit and loss sharing agreement Admission of a new partner by purchase will change total assets and total capitalarrow_forward1) A partner may be admitted into a partnership by I. Investing assets in the partnership II. purchasing a partner's interest III. contributing his/her services I, II or III I only II only I and III 2) X retired from the partnership of X, Y and Z. X received an amount in excess of his capital balance in settlement of his equity. All assets of the partnership are fairly valued. Under these circumstances, a. the partnership shall recognize goodwill b. the partnership shall recognize an expense c. the capital balances of Y and Z would decrease d. the capital balances of Y and Z would not be affected 3) A partner may withdraw or retire from the partnership by a. selling his interest to an outsider b.payment of his interest from partnership funds c. selling his interest to one or more of the…arrow_forwardWhen a new partner is admitted to an existing partnership through the purchase of a portion of existing interest of incumbent partner, which of the following is correct? a. The total capital of the old and new partnership will be the same. b. There will be increase in the total assets of the partnership equivalent to the amount paid by newly admitted partner. c. Goodwill may be recognized by virtue of the admission d. The partnership will recognize gain or loss on the difference between the amount paid and capital transferred.arrow_forward
- Which of the following statements is correct when a new partner is admitted to an existing partnership by purchasing a portion of a capital interest of an existing partner? a. The partnership will recognize gain or loss in the transfer of capital from one partner to another partner. b.The partnership is not dissolved by the admission of a new partner by purchase. c.It will result to revaluation or impairment of existing assets of the partnership. d. It will just result to credit to capital of newly admitted partner with corresponding debit to capital of the selling partnerarrow_forwardRose and Yana formes a partnership. Rose contributed inventory with a fair market value that is lower than its book value. Yana contributed real estate with fair market value that is higher than its book value. At what amount should the partnership record each of the following assets? Inventory Real estate a. Book Value Book Value b. Fair Market Value Book Value c. Book Value Fair Market Value d. Fair Market Value Fair Market Value choose the correct answer and explain.arrow_forwardGenerally, gain is not recognized on contribution of appreciated property to a partnership. Which of the following situations may be an exception to that general rule? PICK ALL THAT APPLY!!! Question 1 options: The contributing partner contributes appreciated property to the partnership and shortly after receives a large distribution of cash from the partnership so that most of the partner's interest in the partnership is liquidated. The exchange appears to essentially be a partial sale of the property through the partnership form. The partner contributes appreciated property to a partnership and the partner is not in control of the partnership (over 50% ownership). A partner receives a capital interest for services performed for the partnership. The partner contributes a property to the partnership that is encumbered by a recourse liability, the partnership assumes the liability, and the net effect of these is to take…arrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College