ADVANCED FINANCIAL ACCOUNTING IA
ADVANCED FINANCIAL ACCOUNTING IA
12th Edition
ISBN: 9781260545081
Author: Christensen
Publisher: MCG
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Chapter 15, Problem 15.13P
To determine

New partner investment: A new partner may acquire a share of the partnership by investing in the business. In this case, the partnership receives the cash or other assets.

Three cases of investment are possible.

  1. The new partner investment equals to the new partner’s proportion of the partnership’s book value.
  2. The investment is more than new partner’s proportion of the partnership’s book value. This indicates that the partnership’s prior net assets are undervalued on the books or the unrecorded goodwill exists.
  3. The investment is for less than the new partner’s proportion of the partnership’s book value. This suggests that partnership’s prior net assets are overvalued on its books or the new partner may be contributing goodwill in addition to the other assets.

the amount new partner S must contribute in cash or other assets in each of the given cases.

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