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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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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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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.