level: Partnerships
Questions and Answers List
level questions: Partnerships
| Question | Answer |
|---|---|
| When contributing assets to form a partnership, how are they valued? | Fair Value |
| Partnerships: How do you calculate Goodwill? | (New Partner Investment/% New Partner) - Total New Capital |
| Partnership Liquidation: Order of Operations (4 steps) | 1. Sell Assets 2. Pay Back Liabilities (External) 3. Pay Back Liabilities (Internal) 4. Distribute Remaining Cash (Partner Balances) |
| Partnership: Adding Partners- GW vs Bonus Method | Bonus Method= New Partner will always get the % desired, excess $ would go to old partners, or new partner would get brought up to the %. Goodwill Method= (Investment / New %) - Total New Capital; This Goodwill will always go to the old partners. |
| Partnership: Removing Partners- GW vs Bonus Method | Bonus Method= Old partners buy leaving partner out, along with any cash they receive. Goodwill Method= Implied FV of Goodwill (usually amount paid extra to partner / Leaving Partner %) is allocated to all partners, before the exiting partner is removed. |