Chapter 10 homework A eBook Problem 10-8 Partnership Formation (LO 10.2) Kele and Nova wish to form the Sioux Partnership. Kele contributes property with an adjusted basis of $70,000, a fair market value of $200,000 that is subject to an $80,000 liability in exchange for 40 percent of Sioux. Nova receives a 60- percent interest in Sioux in exchange for providing services worth $10,000 and $170,000 cash. If an amount is zero, enter "0". a. What amount of gain or loss must Kele recognize as a result of transferring the property to the partnership? Feedback Check My Work Generally, there is no gain or loss recognized by a partnership or any of its partners when property is contributed to a partnership in exchange for an interest in the partnership. This rule applies to the formation of a partnership as well as any subsequent contributions to the partnership. However, there are exceptions to the nonrecognition rule. On formation, income may be recognized under certain circumstances. To determine the partner's basis in the partnership interest, consider the basis of the property contributed, any recognition of gain as well as any allocable liabilities. When determining the partnership's basis in property contributed by a partner, consider the partner's basis in the property. b. What is Kele's basis in the partnership interest immediately after the formation of the partnership including allocation of partnership liabilities? 22,00 c. What is the partnership's basis in the property contributed by Kele? 70,00 d. What is Nova's basis (after considering Kele's liability assumed by the partnership) in the partnership interest immediately after the formation of the partnership including allocation of partnership liabilities? 228,000 e. How much income does Nova recognize on the exchange?
Chapter 10 homework A eBook Problem 10-8 Partnership Formation (LO 10.2) Kele and Nova wish to form the Sioux Partnership. Kele contributes property with an adjusted basis of $70,000, a fair market value of $200,000 that is subject to an $80,000 liability in exchange for 40 percent of Sioux. Nova receives a 60- percent interest in Sioux in exchange for providing services worth $10,000 and $170,000 cash. If an amount is zero, enter "0". a. What amount of gain or loss must Kele recognize as a result of transferring the property to the partnership? Feedback Check My Work Generally, there is no gain or loss recognized by a partnership or any of its partners when property is contributed to a partnership in exchange for an interest in the partnership. This rule applies to the formation of a partnership as well as any subsequent contributions to the partnership. However, there are exceptions to the nonrecognition rule. On formation, income may be recognized under certain circumstances. To determine the partner's basis in the partnership interest, consider the basis of the property contributed, any recognition of gain as well as any allocable liabilities. When determining the partnership's basis in property contributed by a partner, consider the partner's basis in the property. b. What is Kele's basis in the partnership interest immediately after the formation of the partnership including allocation of partnership liabilities? 22,00 c. What is the partnership's basis in the property contributed by Kele? 70,00 d. What is Nova's basis (after considering Kele's liability assumed by the partnership) in the partnership interest immediately after the formation of the partnership including allocation of partnership liabilities? 228,000 e. How much income does Nova recognize on the exchange?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is 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, drawings of a partner, etc.
Question
Dd2.
Question e.
Transcribed Image Text:Chapter 10 homework A
eBook
Problem 10-8
Partnership Formation (LO 10.2)
Kele and Nova wish to form the Sioux Partnership. Kele contributes property with an adjusted basis of $70,000, a fair
market value of $200,000 that is subject to an $80,000 liability in exchange for 40 percent of Sioux. Nova receives a 60-
percent interest in Sioux in exchange for providing services worth $10,000 and $170,000 cash.
If an amount is zero, enter "0".
a. What amount of gain or loss must Kele recognize as a result of transferring the property to the partnership?
0✔
Feedback
Check My Work
Generally, there is no gain or loss recognized by a partnership or any of its partners when property is contributed to
a partnership in exchange for an interest in the partnership. This rule applies to the formation of a partnership as
well as any subsequent contributions to the partnership.
However, there are exceptions to the nonrecognition rule. On formation, income may be recognized under certain
circumstances.
To determine the partner's basis in the partnership interest, consider the basis of the property contributed, any
recognition of gain as well as any allocable liabilities.
When determining the partnership's basis in property contributed by a partner, consider the partner's basis in the
property.
b. What is Kele's basis in the partnership interest immediately after the formation of the partnership including allocation of
partnership liabilities?
22,00
c. What is the partnership's basis in the property contributed by Kele?
70,00
d. What is Nova's basis (after considering Kele's liability assumed by the partnership) in the partnership interest
immediately after the formation of the partnership including allocation of partnership liabilities?
228,000
e. How much income does Nova recognize on the exchange?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education