Podcast
Questions and Answers
When Z is admitted to the partnership of X and Y, who share profits in a ratio of 3:2, what is Z's new profit share?
When Z is admitted to the partnership of X and Y, who share profits in a ratio of 3:2, what is Z's new profit share?
In the partnership of X (5/8) and Y (3/8) when Z is admitted, what is X's new profit share after surrendering 1/5 of his share?
In the partnership of X (5/8) and Y (3/8) when Z is admitted, what is X's new profit share after surrendering 1/5 of his share?
What is the sacrificing ratio between X and Y when they surrender shares to allow Z into the partnership?
What is the sacrificing ratio between X and Y when they surrender shares to allow Z into the partnership?
After admitting Z into the partnership with X and Y, what is the new profit-sharing ratio for X, Y, and Z if X has a new share of 12/25?
After admitting Z into the partnership with X and Y, what is the new profit-sharing ratio for X, Y, and Z if X has a new share of 12/25?
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If W is admitted into a partnership with X, Y, and Z who share profits in a ratio of 2:2:1, what fraction of the share is W admitted for?
If W is admitted into a partnership with X, Y, and Z who share profits in a ratio of 2:2:1, what fraction of the share is W admitted for?
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What is the new profit sharing ratio of A, B, and Z after Z is admitted as a partner?
What is the new profit sharing ratio of A, B, and Z after Z is admitted as a partner?
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How much of A's share does Z acquire when admitted as a new partner?
How much of A's share does Z acquire when admitted as a new partner?
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What is the remaining share after accounting for Z's shares from A and B?
What is the remaining share after accounting for Z's shares from A and B?
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In the situation described with Q, W, and A, what is the status of the journal entry due to A's payment of goodwill?
In the situation described with Q, W, and A, what is the status of the journal entry due to A's payment of goodwill?
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What is the total amount of goodwill that Z's admission is based on?
What is the total amount of goodwill that Z's admission is based on?
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Study Notes
Admission of a Partner
- A new partner's admission can alter the profit-sharing dynamic within an existing partnership.
Common Reasons for Partner Admission
- To bring in new skills, expertise, or resources.
- To expand the business operations.
- To foster growth and overall success.
- To provide additional capital for expansion.
Calculating New Profit Sharing Ratios
- New partner's share is determined based on agreement.
- Remaining share is distributed among existing partners.
- Calculate each existing partner's new share by applying their original share to the remaining share.
- This results in a new profit-sharing ratio for all partners.
Sacrificing Ratio
- It represents the proportion in which existing partners give up their share to accommodate the new partner.
- Determined by comparing an existing partner's old share to their new share.
- The difference between the old and new share is the share sacrificed.
- Sacrificing ratio is crucial for accounting adjustments.
Goodwill Accounting
- Goodwill represents the collective reputation and value of a business above its tangible assets.
- It is often considered when a new partner enters a partnership.
Treatment of Goodwill
- When premium of goodwill is paid privately, there is no need for a journal entry as the transaction is outside the firm.
- When an incoming partner brings in their share of goodwill in kind, the firm's assets and liabilities are adjusted to reflect the new partner's contribution.
- Goodwill might be recorded at a specific value agreed upon by all partners.
- This value is then accounted for as part of the new partner's capital investment.
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Description
This quiz explores the intricacies of admitting a new partner to an existing partnership. It covers reasons for partner admission, the calculation of new profit-sharing ratios, and the concept of sacrificing ratios. Assess your understanding of how these changes affect existing partners and the overall dynamics of the business.
