Assessment 4 Instructions: Partnerships
Complete two exercises in accounting for the equity of a pass-through entity, such as an LLC, limited partnership, or general partnership structure.
Introduction
The partnership form of business ownership is quite popular. One reason is that partnerships are easy to create the double taxation inherent in corporate ownership can be avoided. However, the unlimited liability normally restricts the growth potential for most partnerships. As a result, most partnerships remain small in relation to their larger corporate brothers.
During the formation and operation stages of a partnership’s life, several issues require closer study because of their impact on the financial status of individual partners. Initially, there is the issue of allocating the initial contributions of each partner in relation to their ownership and liability share. During ongoing operations, the issue of allocating annual income and losses sustained by the business must be handled. Lastly, the issues of taking on new partners and the withdrawal of current partners will affect the financial stability of the partnership.
A business unit can exist indefinitely through the periodic admission of new partners. However, sometimes the termination of business activities and liquidation of property can take occur, and there are many potential reasons for this. Several important financial issues surface during these times in the life of a partnership.
Preparation
The following resources are required to complete the assessment.
Complete the problems in the Assessment 4 Problems document using the related template, both of which are linked in the Required Resources for this assessment. All financial information and applicable instructions are provided.
Problem 1: Partnership Operations
- Calculate partnership capital balances.
- Calculate needed partner investment.
- Calculate goodwill resulting from admission of a new partner.
- Calculate bonus resulting from admission of a new partner.
Problem 2: Partnership Liquidation Schedule
- Prepare a partnership liquidation schedule.
Competencies Measured
By successfully completing this assessment, you will demonstrate your proficiency in the course competencies through the following assessment scoring guide criteria:
- Competency 3: Evaluate partnership accounting issues.
- Calculate needed partner investment.
- Calculate goodwill resulting from admission of a new partner.
- Calculate bonus resulting from admission of a new partner.
- Calculate partnership capital balances.
- Prepare a partnership liquidation schedule.
- Competency 5: Communicate in a manner that is professional and consistent with expectations for professionals in the field of accounting.
- Communicate results from accounting calculations accurately and clearly.
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