Question 1

Legally, a change in the ownership of a partnership is not a(n) ______________________________________________ of the old partnership.

Accepted Answer

dissolution

Question 2

When a partnership change in ownership occurs and the partnership has undervalued tangible assets, a method intended to prevent an inequity from occurring among the partners that results in (a) no entries being recorded in the general ledger to revalue the assets and (b) no departure from GAAP is the ______________ ______________________________ method.

Accepted Answer

bonus

Question 3

When a partnership change in ownership occurs and the partnership has goodwill, a method intended to prevent an inequity from occurring among the partners that results in (a) entries being recorded in the general ledger relating to the goodwill and (b) a deviation from GAAP is the __________________________________ method.

Accepted Answer

recording the goodwill

Question 4

When a partnership change in ownership occurs and the partnership has goodwill, a method intended to prevent an inequity from occurring among the partners that results in (a) no entries being recorded in the general ledger relating to the goodwill and (b) no deviation from GAAP is the _____________________________ method.

Accepted Answer

The answer of When a partnership change in ownership occurs...

Question 5

When an existing partnership has goodwill and a new partner is being admitted, a method of dealing with the goodwill that does not deviate from GAAP but may favor the old partners if the goodwill does not materialize is the _________________ _________________________ method.

Accepted Answer

The answer of When an existing partnership has goodwill and...

Question 6

When a partner leaves a partnership (and the partnership's existence is not terminated), the Revised Uniform Partnership Act refers to that as a _____________________________.

Accepted Answer

The answer of When a partner leaves a partnership (and...

Question 7

When a partnership's existence is terminated, the Revised Uniform Partnership Act refers to that as a _____________________________ of the partnership.

Accepted Answer

The answer of When a partnership's existence is terminated, the...

Question 8

When a partner sells all or a portion of his or her partnership interest to an outside party, no entries are required on the partnership's books.

Accepted Answer

When a partner sells their interest, the partnership must update its records to reflect the change in ownership, even though the transaction is between the partner and the outside party.

Question 9

An advantage to the bonus method is that no deviation from GAAP results.

Accepted Answer

The bonus method of accounting for partnership transactions adheres to Generally Accepted Accounting Principles (GAAP), ensuring that financial statements prepared using this method are in compliance with established accounting standards and practices.

Question 10

In partnerships, goodwill cannot be recorded unless it results from a business combination that does not qualify as a pooling of interests.

Accepted Answer

Goodwill can be recorded in partnerships when a new partner is admitted and pays more than the book value of their share of the existing assets, or when the partnership acquires another business, not just in business combinations that do not qualify as a pooling of interests.

Question 11

In partnerships, when goodwill is recorded it cannot be amortized.

Accepted Answer

Goodwill in partnerships can be amortized over a period if it is expected that the benefits from the acquired goodwill will diminish over time. This is often done to reflect the consumption of the economic benefits of the goodwill.

Question 12

When two partnerships combine in a manner that is substantively a pooling of interests, the assets of the combining partnerships cannot be revalued to their current values.

Accepted Answer

The answer of When two partnerships combine in a manner...

Question 13

When an existing partnership that has goodwill admits a new partner, the end result on the new partner's capital account will be the same under both the bonus method and the recording the goodwill method, regardless of whether the agreed-upon value of the goodwill is eventually realized.

Accepted Answer

The bonus method and the recording the goodwill method both result in the same ending capital account balance for the new partner, regardless of whether the agreed-upon value of the goodwill is eventually realized. This is because the bonus method allocates the goodwill to the existing partners, while the recording the goodwill method allocates it to the new partner.

Question 14

An advantage of the recording the goodwill method is that an incoming partner always gets credited to his or her capital account, as a minimum, the amount of cash contributed.

Accepted Answer

The goodwill method ensures that the incoming partner's capital account reflects at least the amount of cash contributed, as any excess is recorded as goodwill.

Question 15

An advantage of the recording the goodwill method over the bonus method is that an incoming partner eventually will end up with a greater capital balance.

Accepted Answer

The recording of goodwill or using the bonus method affects the initial allocation of ownership interests and capital balances among partners, but it does not determine the eventual capital balance of an incoming partner, which can be influenced by future profits, losses, and additional contributions.

Question 16

When a person is being admitted into a partnership that has goodwill, the amount of goodwill deemed to exist is a residual amount derived from the agreed-upon ownership percentages and profit and loss sharing ratios.

Accepted Answer

Goodwill is typically calculated based on the difference between the business's market value and the fair value of its net identifiable assets, not solely on ownership percentages or profit and loss sharing ratios.

Question 17

_____ The purchase of an interest from one or more of the existing partners of a partnership results in

Accepted Answer

The answer of _____ The purchase of an interest from...

Question 18

_____ When a person is being admitted into a partnership and the bonus method has been selected,

Accepted Answer

The answer of _____ When a person is being admitted...

Question 19

_____ When a person is being admitted into a partnership and recording the goodwill method has been selected,

Accepted Answer

The answer of _____ When a person is being admitted...

Question 20

_____ When a person is being admitted into a partnership and the special profit and loss sharing provision method has been selected,

Accepted Answer

The answer of _____ When a person is being admitted...

Quiz 21: Partnerships: Changes in Ownership

Legally, a change in the ownership of a partnership is not a(n) ______________________________________________ of the old partnership.

When an existing partnership has goodwill and a new partner is being admitted, a method of dealing with the goodwill that does not deviate from GAAP but may favor the old partners if the goodwill does not materialize is the _ _________ method.

When a partner leaves a partnership (and the partnership's existence is not terminated), the Revised Uniform Partnership Act refers to that as a _____________________________.

When a partnership's existence is terminated, the Revised Uniform Partnership Act refers to that as a _____________________________ of the partnership.

When a partner sells all or a portion of his or her partnership interest to an outside party, no entries are required on the partnership's books.

An advantage to the bonus method is that no deviation from GAAP results.

In partnerships, goodwill cannot be recorded unless it results from a business combination that does not qualify as a pooling of interests.

In partnerships, when goodwill is recorded it cannot be amortized.

When two partnerships combine in a manner that is substantively a pooling of interests, the assets of the combining partnerships cannot be revalued to their current values.

When an existing partnership that has goodwill admits a new partner, the end result on the new partner's capital account will be the same under both the bonus method and the recording the goodwill method, regardless of whether the agreed-upon value of the goodwill is eventually realized.

An advantage of the recording the goodwill method is that an incoming partner always gets credited to his or her capital account, as a minimum, the amount of cash contributed.

An advantage of the recording the goodwill method over the bonus method is that an incoming partner eventually will end up with a greater capital balance.

When a person is being admitted into a partnership that has goodwill, the amount of goodwill deemed to exist is a residual amount derived from the agreed-upon ownership percentages and profit and loss sharing ratios.

_____ The purchase of an interest from one or more of the existing partners of a partnership results in

_____ When a person is being admitted into a partnership and the bonus method has been selected,

_____ When a person is being admitted into a partnership and recording the goodwill method has been selected,

_____ When a person is being admitted into a partnership and the special profit and loss sharing provision method has been selected,