Partnership is a form business wherein two or more individuals carry on a business to achieve a common purpose. All the norms and mutual decisions of partners are written down in a partnership agreement. To discuss: Concerns an individual might face when 30% interest in partnership is sold to an incoming partner for 30% of existing capital balances.

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Answer 1

Question

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

Chapter 14, Problem 1UTI

To determine

Introduction: Partnership is a form business wherein two or more individuals carry on a business to achieve a common purpose. All the norms and mutual decisions of partners are written down in a partnership agreement. To discuss: Concerns an individual might face when 30% interest in partnership is sold to an incoming partner for 30% of existing capital balances.

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?

A partnership is contemplating selling a 30% stake to a new partner in exchange for 30% of the partnership's current capital balances. What reservations do you have about this proposal?

In the AD partnership, Allen's capital is $140,000 and Daniel's is $40,000 and they share income in a 3:1 ratio, respectively. They decide to admit David to the partnership. Each of the following questions is independent of the others. Refer to the information provided above. What amount will David have to invest to give him one-fifth percent interest in the capital of the partnership if no goodwill or bonus is recorded? Multiple Choice A. $36,000 B. $50,000 C. $45,000 D. $60,000

Answer 2

Question

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

Chapter 14, Problem 1UTI

To determine

Introduction: Partnership is a form business wherein two or more individuals carry on a business to achieve a common purpose. All the norms and mutual decisions of partners are written down in a partnership agreement. To discuss: Concerns an individual might face when 30% interest in partnership is sold to an incoming partner for 30% of existing capital balances.

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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Answer 3

Question

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

Chapter 14, Problem 1UTI

To determine

Introduction: Partnership is a form business wherein two or more individuals carry on a business to achieve a common purpose. All the norms and mutual decisions of partners are written down in a partnership agreement. To discuss: Concerns an individual might face when 30% interest in partnership is sold to an incoming partner for 30% of existing capital balances.

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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Answer 4

Question

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

Chapter 14, Problem 1UTI

To determine

Introduction: Partnership is a form business wherein two or more individuals carry on a business to achieve a common purpose. All the norms and mutual decisions of partners are written down in a partnership agreement. To discuss: Concerns an individual might face when 30% interest in partnership is sold to an incoming partner for 30% of existing capital balances.

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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Answer 5

Chapter 14, Problem 1UTI

To determine

Introduction: Partnership is a form business wherein two or more individuals carry on a business to achieve a common purpose. All the norms and mutual decisions of partners are written down in a partnership agreement. To discuss: Concerns an individual might face when 30% interest in partnership is sold to an incoming partner for 30% of existing capital balances.

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.

Answer 6

Chapter 14, Problem 1UTI

To determine

Introduction: Partnership is a form business wherein two or more individuals carry on a business to achieve a common purpose. All the norms and mutual decisions of partners are written down in a partnership agreement. To discuss: Concerns an individual might face when 30% interest in partnership is sold to an incoming partner for 30% of existing capital balances.

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.

Answer 7

Chapter 14, Problem 1UTI

To determine

Introduction: Partnership is a form business wherein two or more individuals carry on a business to achieve a common purpose. All the norms and mutual decisions of partners are written down in a partnership agreement. To discuss: Concerns an individual might face when 30% interest in partnership is sold to an incoming partner for 30% of existing capital balances.

Answer 8

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.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 14 - Prob. 1UTI Ch. 14 - Prob. 2UTI Ch. 14 - Prob. 3UTI Ch. 14 - Prob. 4UTI Ch. 14 - Prob. 2E Ch. 14 - Prob. 3E Ch. 14 - Prob. 4.1E Ch. 14 - Prob. 4.2E Ch. 14 - Prob. 4.3E Ch. 14 - Prob. 4.4E

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