Answer 3 & 4 only. Exercise 2 (LO 3, 4, 8) Issues involving goodwill and the liquidation of a partner-ship. Your client has been asked to invest in a partnership which will develop a piece of realestate for commercial use. It is estimated that the development will occur over three years afterwhich time the partnership will be liquidated. After reviewing selected historical and prospec-tive financial information, your client has asked you to provide answers to the followingquestions:1. I thought goodwill could only be recorded by a company if it purchased another company.Why does the historical balance sheet show goodwill as an asset even though the partnershiphas not acquired any other companies?2. Apparently, a contribution of capital to a partnership can be recorded by either the bonus orgoodwill method. For purposes of securing bank financing and reporting an attractive returnon investment, which method would be most appropriate?3. If the partnership secured a bank loan, upon liquidation of the partnership which would bepaid back first, the bank loan or my invested capital balance?4. If the partnership was liquidated and the partnership's liabilities exceeded the partners' capi-tal balances, which partner would be responsible for the excess liabilities?

3. If the partnership secured a bank loan, upon liquidation of the partnership which would be paid back first, the bank loan or my invested capital balance? 4. If the partnership was liquidated and the partnership's liabilities exceeded the partners' capi- tal balances, which partner would be responsible for the excess liabilities?

3. If the partnership secured a bank loan, upon liquidation of the partnership which would be paid back first, the bank loan or my invested capital balance? 4. If the partnership was liquidated and the partnership's liabilities exceeded the partners' capi- tal balances, which partner would be responsible for the excess liabilities?

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter15: Property Transactions: Nontaxable Exchanges

Section: Chapter Questions

Problem 4DQ

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