Partnership
FORMATION
Recognition of Non-Cash Asset
1. Agreed Value
2. Fair Market Value
3. Book Value
Formation
 Prepare journal entries to adjust to agreed value
 Debit investments; Credit capital account
 For those accounts with contra-accounts, use the contra-account title.
Methods of Equating Capital
1. Bonus method – mere transfer of capital
2. Goodwill method - recognize asset
OPERATIONS
Rules for Dividing Profit
1. In accordance with the agreement
2. Capital interest
3. Book value
Rules for Dividing Losses
1. In accordance with the agreement
2. Division of profits
3. Capital interest
Types of Withdrawal
1. Personal/Temporary
a. In anticipation of salary profits or allowances
b. Charged to drawing
2. Capital/Permanent
a. Charged to capital
DISSOLUTION
Admission of a New Partner
 Admission by purchase
 Mere transfer of capital
 Revaluation to old partners
 Admission by investment
 Bonus: Total Agreed Capital (TAC) = Total Contributed Capital (TCC)
 Revaluation: recognize other assets
 Retirement/Withdrawal
 Sale to a new partner (refer to ABP)
 Sale to continuing partners (refer to ABP)
 Sale to partnership


Bonus Method:
Cash Settlement
xx
Interest of ret partner
(xx)
Bonus to remaining partner
(xx)
Revaluation method
Cash Settlement
xx
Interest to ret partner
(xx)
Share of ret partner
xx
Interest of ret partner
x%
Total Asset Revaluation
xx
LUMP-SUM LIQUIDATION
1. Realization of non-cash asset and distribution of gain/loss.
2. Payment of liquidation expense
3. Payment of liabilities to outsiders
4. Elimination of capital deficiency (check solvency)
5. Payment to partners
a. Loan balances
b. Capital balances
INSTALLMENT LIQUIDATION
1. Realization of non-cash asset on a piece-meal basis
2. Gain/loss on realization
3. Cash priority program or safety payments
4. Distribution of available cash
Cash, beginning
xx
Cash realization of NCA
xx
Liquidation expense
(xx)
Liabilities
(xx)
Cash withheld
(xx)
Available Cash
xx
Corporate Liquidation
STATEMENT OF REALIZATION & LIQUIDATION
-
Periodic report of trustee (e.g. monthly) intended to show
progress toward the liquidation.
-
Quitting concern not going concern
STATEMENT OF AFFAIRS
-
Preliminary report of trustee
-
Financial statement designed for insolvent corporation
-
Summary of estimated results of liquidation
CLASSIFICATION
Assets
1. Assets pledged with fully secured creditors
2. Assets pledged with partially secured creditors
3. Free assets
Liabilities
1. Unsecured creditors with priority
a. Administrative or liquidation expenses
b. Wages payable
c. Taxes
2. Fully secured creditors
3. Partially secured creditors
4. Unsecured creditors without priority
RECOVERY PERCENTAGE
-
Claims of unsecured creditors without priority
-
Recovery percentage: NFA / US CRs without priority
Net Free Assets
FS Assets
xx
FS Liabilities
(xx)
Other Financial Assets
xx
US CRs without priority
xx
NET FREE ASSETS
xx
Unsecured Creditors without priority
PS Liabilities
xx
PS Assets
(xx)
US CRs without Priority
xx
Est Deficiency to Unsecured Creditors
Net Free Assets – US CRs without Priority
PAYMENTS TO CREDITORS
1. Fully secured creditors = 100%
2. Partially secured creditors
a. Secured part = 100%
b. Unsecured part = Unsecured part x Recovery Percentage
3. Unsecured creditors with priority = 100%
4. Unsecured creditors without priority
= Unsecured Liab. w/o priority x Recovery Percentage
(Note: 2b and 4, the result if Net Free Assets)
Long-Term Construction Contracts
OVERVIEW
-
Issued on May 28, 2014, it supersedes:
1. IAS 18 – Revenue
2. IAS 11 – Construction Contracts
3. IFRIC 13 – Customer Loyalty Program
4. IFRIC 15 – Agreements for Construction of Real Estate
5. IFRIC 18 – Transfers of Assets from Customers
6. SIC 31 – Revenue Barter Trans Involving Advertising
Services
-
Improve comparability of reported revenue
-
Establish principles about the nature, timing, and uncertainty
OBJECTIVE
of revenue and cash flows arising from a contract with
customer
SCOPE
-
Applies to all contract with customers EXCEPT:
1. Leases
2. Insurance contracts
3. Financial instruments
4. Guarantees
5. Certain non-monetary exchanges
-
Sale of non-monetary financial assets, such as PPE, real
estate or intangible assets will also be subject to some of the
requirements of the new model
-
Contract with customer may be partially within the scope of
another standard
DEFINED TERMS
Contract
-
An agreement between 2 or more parties that creates
enforceable rights and obligations
Customer
-
A party that has contracted with an entity to obtain goods or
services in exchange for consideration
Income
-
Increases in economic benefits during the accounting period
in the form of inflows or enhancements of assets or decreases
of liabilities that result in an increase in equity, other than
those relating to contributions from equity participants
Performance Obligation
-
A promise in a contract with a customer to transfer to the
customer either;
1. A good or service (or bundle) that is distinct
2. Series of distinct goods or services that are substantially
the same and that have the same pattern of transfer
with customer
Revenue