Ch16 Beams Advanced Accounting
Ch16 Beams Advanced Accounting
Ch16 Beams Advanced Accounting
Partnerships –
Formation,
Operations, and
Changes in
Ownership
Interests
Partnerships: Objectives
1: PARTNERSHIP
CHARACTERISTICS
Partners have
– Mutual agency – the ability to legally bind the
partnership
– Unlimited liability – liable for partnership debts,
including the use of personal assets
2: INITIAL INVESTMENT
Col Cro
Cash 7
Cash - 7,000
Inventory 35
Land 10,000 -
Land 10
Building 40,000 - Building 40
Inventory items - 35,000 Col, Capital 50
Total 50,000 42,000 Cro, Capital 42
Goodwill 8,000
Cro, Capital 8,000
– Bonus allowance
– Salary allowance
– Interest allowance on capital invested
• Based on average, beginning or ending capital balance
– Sharing of remaining amounts
4: ADMITTING A NEW
PARTNER
Alf Capital 25
Cob Capital 25
Before After
Capital Share Capital Share
Alf $50 50% $25 25%
Bal 50 50% 50 50%
Cob 25 25%
Total $100 $100
Cash 50
Dre Capital 1
Boy Capital 1
Cry Capital 52
Bonus method, bonus to new partner
5: DEATH OR RETIREMENT
OF A PARTNER
Jus Capital 80
Cash 80
Jus Capital 80
Ann Capital 8
Mic Capital 4
Cash 92
Jus Capital 80
Goodwill 12
Cash 92
Jus Capital 92
Cash 92
The exiting partner is then paid the amount of his
capital account.
© Pearson Education Limited 2015 16-47
Partnerships – Formation, Operations, and Changes in
Ownership Interests
6: LIMITED
PARTNERSHIPS