Chap015Day2_class

Chap015Day2_class - 1 Chapter 15 Part II Changes in...

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Unformatted text preview: 1 Chapter 15 Part II Changes in Membership ยก Admission of a new partner ยข Purchase of a current interest ยข Contribution to the Partnership 2 Admission of a New Partner ยก When the makeup of the partnership changes, the partnership is dissolved. ยก A new partnership is immediately formed. ยก New partner acquires partnership interest by: ยข Purchasing it from the other partners, or ยข Making a contribution to the partnership. ยก When the makeup of the partnership When the makeup of the partnership changes, the partnership is dissolved. changes, the partnership is dissolved. ยก A new partnership is immediately formed. A new partnership is immediately formed. ยก New partner acquires partnership interest New partner acquires partnership interest by: by: ยข Purchasing it from the other partners, or Purchasing it from the other partners, or ยข Making a contribution to the partnership. Making a contribution to the partnership. 3 Admission of a New Partner Purchase of a Current Interest ยก A new partner can purchase partnership interest directly from the existing partners. ยข The cash goes to the partners, not to the partnership. ยก Two methods are available to account for the transfer of ownership. ยข Book Value Approach ยข Goodwill (Revaluation) Approach ยก A new partner can purchase A new partner can purchase partnership interest directly partnership interest directly from the existing partners. from the existing partners. ยข The cash goes to the partners, The cash goes to the partners, not to the partnership. not to the partnership. ยก Two methods are available to Two methods are available to account for the transfer of account for the transfer of ownership. ownership. ยข Book Value Approach Book Value Approach ยข Goodwill (Revaluation) Goodwill (Revaluation) Approach Approach 4 Book Value Example ยก Doe, Raye, and Mee have a partnership. ยก Using the Book Value Approach, prepare the entry assuming Flatt pays $60,000 directly to the other partners for a 20% partnership interest. Partner Capital Balance Profit & Loss Ratio Doe $ 30,000 40% Raye $ 50,000 25% Mee $ 60,000 35% Admission of a New Partner Purchase of a Current Interest 5 Partnership General Journal Page 18 Date Description Debit Credit Admission of a New Partner Purchase of a Current Interest Book Value Example ยก The cash goes to Doe, Raye, and Mee, NOT to the partnership. ยก Each partner gives up 20% of their existing capital. Book Value Example ยก The cash goes to Doe, Raye, and Mee, NOT to the partnership. ยก Each partner gives up 20% of their existing capital. Prepare the journal entry to admit Flatt to the partnership. Prepare the journal entry to admit Flatt to the partnership. 6 P a r t n e r s h ip G e n e r a l J o u r n a l P a g e 1 8 D a t e D e s c r ip t io n D e b it C r e d it 3 1 - D e c C a p it a l - D o e 6 ,0 0 0 C a p it a l - R a y e 1 0 ,0 0 0 C a p it a l - M e e 1 2 ,0 0 0 C a p it a l - F la t t 2 8 ,0 0 0...
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This note was uploaded on 05/01/2010 for the course MGMT 503 taught by Professor Staff during the Spring '08 term at Purdue.

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Chap015Day2_class - 1 Chapter 15 Part II Changes in...

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