1.4.1.2 - Accounting Adjustments on Admission
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Practice Questions
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Define the term 'Goodwill' in the context of partnership.
💡 Hint: Think about what makes a business valuable aside from its physical assets.
What is the purpose of the new profit-sharing ratio?
💡 Hint: Consider why it's necessary when a new partner flows into an existing partnership.
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Interactive Quizzes
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What does the sacrificing ratio indicate?
💡 Hint: Think about the change in ownership.
True or False: Goodwill is a tangible asset.
💡 Hint: Recall what goodwill signifies in partnerships.
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Challenge Problems
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In a partnership of four partners with shares 25%, 25%, 25%, and 25%, a new partner joins with a share of 20%. Calculate the new share ratios and determine the sacrificing ratio.
💡 Hint: Break down each partner’s old and new shares to find the sacrifices.
A partner retires while a new partner is admitted. Discuss how to adjust goodwill and address outstanding liabilities.
💡 Hint: Consider the two-part impact during admission and retirement together.
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