How is the bonus method used to record a new partner in a partnership?
The bonus method will be applied when the incoming partner contributes assets that are worth either more or less than the receiving partnership interest is worth. If the incoming partner contributes a purchase price that is greater than the value of the interest received, then a bonus will be recorded to the partnership. If, however, the incoming partner contributes amounts that are less than the value of the interest received, then a bonus will be recorded to the partnership.
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How is a partner’s capital account valued when a partnership is formed?
The partners capital account is based on the fair value of assets contributed, less any liabilities that the partnership assumes. For example, if Superwoman contributed equipment with a fair value of $50,000 and a $10,000 mortgage that the partnership assumed, then her capital account would be $40,000.
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Under U.S. GAAP and IFRS, what are the three different ways a partnership can record the admission of a new partner?
Just remember, every new partner must “BEG” to join the partnership. U.S. GAAP and IFRS allows partnerships to record the admission of a new partner using the bonus method, exact method, and goodwill method.
How is a partner’s capital account valued when a partnership is formed?
The partners capital account is based on the fair value of assets contributed, less any liabilities that the partnership assumes. For example, if Superwoman contributed equipment with a fair value of $50,000 and a $10,000 mortgage that the partnership assumed, then her capital account would be $40,000.
Under U.S. GAAP and IFRS, what are the three different ways a partnership can record the admission of a new partner?
Just remember, every new partner must “BEG” to join the partnership. U.S. GAAP and IFRS allows partnerships to record the admission of a new partner using the bonus method, exact method, and goodwill method.
