BUS FPX 4063 Assessment 4 Partnership Operations

BUS FPX 4063 Assessment 4 Partnership Operations

Student Name

Capella University

BUS-FPX4063 Advanced Financial Accounting Topics and Trends

Prof. Name:

Date

Reporting a Change in the Composition of a Partnership

Exact Amount of Investment

To determine the exact amount of investment, calculations were based on the partnership’s current valuation. An investment of 25% in a partnership worth $682,000 equates to $170,500. The implied value of the partnership was determined by adding $79,200 in cash, representing 10% of the investment ($68,200), plus goodwill of $11,000. After adjusting for the new partner’s contribution, the cash less liabilities and goodwill amount totaled $662,200, distributed as follows:

• Cash: $761,200
• Liabilities: $88,000
• Goodwill: $11,000

Each partner’s capital was reduced by 2.5% to accommodate the new partner (P):

• L’s Capital (27.5%): $182,105
• M’s Capital (7.5%): $49,665
• N’s Capital (37.5%): $248,325
• O’s Capital (17.5%): $115,885
• P’s Capital (10%): $66,220

P’s Investment

P’s initial contribution of $136,400 represents 20% of the partnership. Deducting $92,400 results in a gain of $44,000 on purchase, leading to a recalculated partnership value of $638,000. Dividing equally among the five partners gives a capital distribution of $127,600 per partner:

• L: $127,600
• M: $127,600
• N: $127,600
• O: $127,600
• P: $127,600

Total Capital After Investment

Following a capital infusion of $121,000, the partnership value rose to $803,000, with liabilities of $88,000. The resulting cash balance of $715,000 was distributed as follows:

• L’s Capital (5%): $35,750
• M’s Capital (25%): $178,750
• N’s Capital (15%): $107,250
• O’s Capital (35%): $250,250
• P’s Capital (20%): $143,000

N’s Capital Balance

N’s withdrawal of $247,500, which is 125% of their capital balance of $198,000, reduced the cash balance to $434,500. This remaining cash was distributed equally among the remaining four partners:

• L: $108,625
• M: $108,625
• O: $108,625
• P: $108,625

Schedule of Partnership Liquidation

The liquidation schedule outlines the process for winding up the partnership of Edmonds, Beatty, and Elder.

BUS FPX 4063 Assessment 4 Partnership Operations

Initial Balances and Adjustments

Non-Cash Asset Sales and Liability Settlements

Predistribution and Assumed Loss Allocation

Predistribution Plan
The predistribution plan accounts for each partner’s ability to absorb losses. Maximum loss allocation and adjustments are provided in two steps:

Schedule 2:

Schedule 3:

BUS FPX 4063 Assessment 4 Partnership Operations

References

American Psychological Association. (2020). Publication manual of the American Psychological Association (7th ed.). Washington, DC: Author.