WITHDRAWAL%20OF%20A%20PARTNER - PowerPoint PPT Presentation

View by Category
About This Presentation
Title:

WITHDRAWAL%20OF%20A%20PARTNER

Description:

WITHDRAWAL OF A PARTNER. A partner may withdraw from a partnership voluntarily by selling his or her equity in the firm or involuntarily by reaching a mandatory ... – PowerPoint PPT presentation

Number of Views:57
Avg rating:3.0/5.0
Slides: 9
Provided by: onca
Learn more at: http://web.dsbn.edu.on.ca
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: WITHDRAWAL%20OF%20A%20PARTNER


1
WITHDRAWAL OF A PARTNER
  • A partner may withdraw from a partnership
    voluntarily by selling his or her equity in the
    firm or involuntarily by reaching a mandatory
    retirement age or by dying.
  • The withdrawal of a partner may be accomplished
    by
  • 1. payment from remaining partners personal
    assets or
  • 2. payment from partnership assets.

2
PAYMENT FROM PARTNERS PERSONAL ASSETS
  • The withdrawal of a partner when payment is made
    from partners personal assets is the direct
    opposite of admitting a new partner who purchases
    a partners interest.
  • Withdrawal by payment from partners personal
    assets is a personal transaction between the
    partners.

3
BONUS TO RETIRING PARTNER
  • A bonus may be paid to a retiring partner when
  • 1. the fair market value of partnership assets is
    greater than their book value,
  • 2. there is unrecorded goodwill resulting from
    the partnerships superior earnings record, or
  • 3. the remaining partners are anxious to remove
    the partner from the firm.

4
BONUS TO RETIRING PARTNER
The bonus is deducted from the remaining
partners capital balances on the basis of
their income ratios at the time of the
withdrawal. The procedure for determining the
bonus to the retiring partner and the allocation
of the bonus to the remaining partners
is 1. Determine the amount of the bonus by
subtracting the retiring partners capital
balance from the cash paid by the partnership.
2. Allocate the bonus to the remaining partners
on the basis of their income ratios.
5
BONUS TO REMAINING PARTNERS
  • The retiring partner may pay a bonus to the
    remaining partners when
  • 1. recorded assets are overvalued,
  • 2. the partnership has a poor earnings
    record, or
  • 3. the partner is anxious to leave the
    partnership.

6
BONUS TO REMAINING PARTNERS
The bonus is added to the remaining
partners capital balances on the basis of their
income ratios at the time of the withdrawal.
The procedure for determining the bonus to the
remaining partners is 1. Determine the amount
of the bonus by subtracting the retiring
partners capital balance from the cash paid
by the partnership. 2. Allocate the bonus to
the remaining partners on the basis of their
income ratios.
7
LIQUIDATION OF A PARTNERSHIP
  • The liquidation of a partnership terminates the
    business.
  • To liquidate a partnership, follow these steps
  • 1. Sell noncash assets for cash and recognize
    any gain or loss on realization.
  • 2. Allocate any gain or loss on realization to
    the partners based on their income ratios.
  • 3. Pay partnership liabilities in cash.
  • 4. Distribute remaining cash to partners based
    on their capital balances.

8
LIQUIDATION OF PARTNERSHIP
  • No capital deficiency
  • Capital deficiency
  • Partner with deficiency pays partnership
  • Partners with credit capital balances absorb
    deficiency in income sharing proportion
About PowerShow.com