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Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership
E15-8 Multiple-Choice Questions on the Admission of a Partner
1.
d –
Specified no bonus or goodwill:
5/6 estimated total resulting capital
$ 150,000
Estimated total resulting capital ($150,000 / 5/6)
$ 180,000
Required investment ($180,000 x 1/6)
$ 30,000
2.
d –
Direct purchase; reclassify Claire's capital only.
3.
c –
Scott invests $36,000 for a 1/5 interest:
Investment in partnership
$ 36,000
New partner's proportionate book value
[($120,000 + $36,000) x 0.20]
(31,200)
Difference (investment > book value)
$ 4,800
Method: Goodwill to prior partners
Step 1:
1/5 estimated total resulting capital
$ 36,000
Estimated total resulting capital
($36,000 / 0.20)
$ 180,000
Step 2:
Estimated total resulting capital
$ 180,000
Total net assets not including goodwill
($120,000 + $36,000)
(156,000)
Estimated goodwill to prior partners
$ 24,000
4.
b –
Lisa invests $40,000 and total capital specified as $150,000:
Investment in partnership
$ 40,000
New partner's proportionate book value
[($110,000 + $40,000) x 1/3]
(50,000)
Difference (investment < book value)
$
(10,000)
Method: Bonus or goodwill to new partner
Specified total resulting capital
$ 150,000
Total net assets not including goodwill
($110,000 + $40,000)
(150,000)
Estimated goodwill
$ -0-
Therefore, bonus of $10,000 to new partner
Boris' capital = $54,000 = $60,000 - ($10,000 x 6/10)
Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership
E15-9 Withdrawal of a Partner
a.
Karl receives $38,000 and no goodwill is recorded:
Bonus to withdrawing partner:
Payment
$ 38,000
Karl’s capital account
(30,000)
Bonus paid
$ 8,000
Karl, Capital
30,000
Luis, Capital ($8,000 x 0.80)
6,400
Marty, Capital ($8,000 x 0.20)
1,600
Cash
38,000
b.
Karl receives $42,000 and only the withdrawing partner's share of goodwill is
recognized:
Payment to Karl
$ 42,000
Karl's capital account
(30,000)
Karl's share of goodwill
$ 12,000
Goodwill
12,000
Karl, Capital
30,000
Cash
42,000
c.
Recognize all implied goodwill on payment of $35,000:
Karl's share of goodwill
($35,000 - $30,000 capital)
$ 5,000
1/6 Total estimated goodwill
$ 5,000
Total estimated goodwill
($5,000 / 0.16666…)
$30,000
Record goodwill:
Goodwill
30,000
Luis, Capital ($30,000 x 0.6667)
20,000
Marty, Capital ($30,000 x 0.1667)
5,000
Karl, Capital ($30,000 x 0.1667)
5,000
Withdrawal of Karl:
Karl, Capital
35,000
Cash
35,000
d. Section 701 of the UPA 1997 defines the buyout price of a disassociated partner’s
interest in the partnership as the estimated amount that would be distributable to that
partner if the assets of the partnership were sold at a price equal to the greater of the
liquidation value or the value based on a sale of the entire business as a going concern
without the disassociated partner and the partnership was wound up including all
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P15-11 Admission of a Partner
a.
Wayne purchases one-half of Merina's investment for $90,000:
Merina, Capital
80,000
Wayne, Capital
80,000
b.
Wayne invests amount for one-third interest; no goodwill or bonus:
2/3 Total resulting capital
$ 360,000
Total resulting capital ($360,000 / 2/3)
$ 540,000
Amount to be invested by Wayne ($540,000 x 1/3)
$ 180,000
Cash
180,000
Wayne, Capital
180,000
c.
Wayne invests $110,000 for a one-fourth interest; goodwill:
Investment in partnership
$ 110,000
New partner's proportionate book value
[($360,000 + $110,000) x 1/4]
(117,500)
Difference (investment cost < book value)
$ (7,500)
Method: Goodwill to new partner
Step 1:
3/4 estimated total resulting capital
$ 360,000
Estimated total resulting capital ($360,000 / 3/4)
$ 480,000
Step 2:
Estimated total resulting capital
$ 480,000
Total net assets not including goodwill
($360,000 + $110,000)
(470,000)
Estimated goodwill to new partner
$ 10,000
Cash
110,000
Goodwill
10,000
Wayne, Capital
120,000
$120,000 = $480,000 total resulting capital x 1/4
d.
Wayne invests $100,000 for a one-fourth interest; some inventory is obsolete:
Investment in partnership
$ 100,000
New partner's proportionate book value
[($360,000 + $100,000) x 1/4]
(115,000)
Difference (investment cost < book value)
$ (15,000)
Method: Asset revaluation decrease to prior partners
