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5 cards from this section. Quick, good the night before a test.
What is the definition of a partnership?
Think about who is involved in the ownership.
How are profits shared in a partnership without a partnership deed?
Consider what happens when no specific terms are set.
What does mutual agency imply in partnerships?
Think about how decisions are made in a partnership.
True or False: Goodwill is a tangible asset.
Consider what type of asset goodwill represents.
A partnership has three partners sharing profits in the ratio of 2:2:1. If the business makes a profit of $50,000, how much does each partner receive? Now, if a new partner is admitted with a 25% share, how will the profits be divided after adjusting goodwill valued at $10,000?
First divide the profit among the original three partners, and then figure out how the inclusion of the new partner alters everyone's share.
If the average profit of a partnership is $80,000 and the normal rate of return is 10%, calculate the super profit assuming total capital employed is $600,000. Use this to determine goodwill using the capitalisation method for five years.
Calculate normal profit first, which tells whether your average profit is above or below normal, leading to super profit.
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