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 partner
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- LO.2 In the current year, Bill Parker (54 Oak Drive, St. Paul, MN 55164) is considering making an investment of 60,000 in Best Choice Partnership. The prospectus provided by Bills financial planner indicates that the partnership investment is not a passive activity and that Bills share of the entitys loss in the current year will likely be 40,000, whereas his share of the partnership loss next year will probably be 25,000. Write a letter to Bill in which you indicate how the losses would be treated for tax purposes in the current year and the following year.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?14 A new partner is admitted to an existing partnership. As a result of admission, the capital balances of incumbent partners increase while the contributed capital of the new partner is less than his capital credit. Which of the following is the best explanation? Group of answer choices a. Bonus has been given by the incumbent partners to the new partner. b. Bonus has been given by the incumbent partners to the new partner and revaluation of existing assets of old partnership has been recognized. c. Bonus has been given by the new partner to incumbent partners and impairment loss of existing assets of old partnership has been recognized. d. Revaluation of existing assets of old partnership has been recognized.
- 1. When the investment of a new partner is below the new partners' capital balance and goodwill is not recorded, who will receive the bonus: a.The new partner.b.The old partners in their old profit and loss ratio.c.The old partners in their new profit and loss ratio.d.The old and new partners in their new profit and loss ratio 2.S1: Admission of a new partner by investment generally increases the total assets and capital of the new partnership unless there is a negative asset revaluation.S2: Admission of a new partner by the purchase of interest will never affect the total assets and capital of the new partnershipa. S1 is false, S2 is true b. Both statements are true c. Both statements are false d. S1 is true, S2 is false 3. S1: In lumpsum liquidation, the remaining cash available after realization and payment of liquidation expenses, will always be equal to the total interest of the partners.S2: In installment liquidation, the partner who has the highest absorption capacity shall be…Select for each of the following either "Yes", it is a guaranteed payment or "No", it is not.\\n\\n1. An amount paid to a partner for the performance of services. \\n2. An amount paid each year to the partners as a return on their investment in the partnership. \\n3. An amount paid that is comparable to a salary or interest payment. \\n4. Payments that are generally not deductible. \\n5. Payments that can result in a loss to the entity. \\n\\nb. Complete the statements below regarding the reporting of guaranteed payments on Form 1065 and its various schedules.\\n\\nGuaranteed payments are \\n on Form 1065. These amounts are also shown on \\n as an item that must be allocated to the partners for them to report as ordinary income. Therefore, in the partnership's "book-tax reconciliation" on \\n, the guaranteed payments are added to book income so that the two measures of the partnership's income can be equal.\\n\\nc. Complete the statement below regarding the reporting of guaranteed…I. It is possible to invests assets into the partnership and be given zero capital credit.II. Total contributed capital is the sum of the capital balances of the old partners and the actualinvestment of the new partner. It should always equal the new partnership capital. A. TRUE; TRUEB. TRUE; FALSEC. FALSE; TRUED. FALSE; FALSE
- 12. Partners may admit a new partner in the partnership for the following reasons, except: A. Need for additional capital B. Need for skills or expertise of the new partner C. Partners want to reduce their interest in the partnership D. All of the above E. Answer not givenIf A is the total capital of the partnership before the admission of a new partner, B is the total capital of the partnership after the investment of a new partner, C is the amount of the new partner’s investment, and D is the amount of capital credit to the new partner, then there isa) A bonus to the old partner if B = A + C and D=C.b) A bonus to the new partner if B = A + C and D=C.c) A bonus to the old partner if B = A + C and D>C.d) A bonus to the new partner if B = A + C and D>C.3. If the proceeds from the sale of non – cash assets is less than the book value of the non – cash assets sold, this will Group of answer choices Decrease both the partnership assets and partners’ equity Increase the partnership assets but decrease the partners’ equity Decrease the partnership assets but increase the partners’ equity Increase both the partnership assets and the partners’ equity
- 8. If the proceeds from the sale is less that the book value of the non-cash assets sold, this will a decrease the partnership assets but increase the partners' equity.b. increase the partnership assets but decrease the partners' equity.C. decrease both the partnership assets and the partners equity.d. Increase both the partnership assets and the partners' equityThe picture attached here is the problem. Choose the correct LETTER of answer: What is the amount of total liabilities after formation? a. P450,000 b. P475,000 c. P500,000 d. P525,000 e. None of the above. What amounts should be recorded as capital for Darren and Darryl at the formation of the partnership? a. P650,000 P450,000 b. P675,000 P475,000 c. P700,000 P500,000 d. P725,000 P525,000 e. None of the above What is the amount of total partners capital after the formation? a. P1,100,000 b. P1,150,000 c. P1,200,000 d. P1,250,000 e. None of the above8. In case the partnership makes profit, how will an industrial partner be given a share?A. what is just equitableB. equallyC. arbitrarilyD. proportion to capital contribution 9. Which of the following is not considered a legitimate expense of a partnership?A. Supplies used in the partnership’s officeB. Depreciation on assets contributed to the partnership by partnersC. Salaries for management hired to run the business D. Interest paid to partners based on their capital balances
