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3 cards from this section. Quick, good the night before a test.
What is the primary reason for admitting a new partner?
Think about what businesses need for growth.
What term describes the portion of an existing partner’s share that is given up for the new partner?
It's a ratio that shows what old partners sacrifice.
What is the first step when admitting a new partner?
Consider the order in which financial agreements are made.
True or False: Goodwill should never be accounted for when admitting a new partner.
Think about the importance of business reputation.
A partnership firm consisting of three partners (X, Y, Z) has a profit-sharing ratio of 5:3:2. A new partner W is to be admitted, who is willing to pay a goodwill of 20,000. If the new ratio after admission is 4:3:2:1, calculate the sacrificing ratio for each partner, and how much goodwill each will receive.
Focus on calculating each partner's change in share ratio.
Consider a partnership where Partner A wants to retire, and a new Partner B will take their place. How would the goodwill be handled in this situation if Partner A has a significant reputation? Discuss the accounting treatment.
Look at how Partner A's contributions relate to the overall business value.
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