Chapter 9

bonus method

A partner brings valuable expertise to a partnership. The partnership records no asset for this expertise, but the contributing partner nonetheless receives an additional capital credit. By crediting this partners' capital account, the partnership has employed the ____________________.

flows through

According to the IRC, partnership income ____________________ to the individual tax returns of the individual partners.

tax benefits

Alternative legal forms of the partnerships have been provided in many state laws that both limit the liability of individual partners while maintaining the __________________ of the partnership form of business organization.

double taxation

Because partnership income is passed through to the individual partners tax returns, the partnership is said to avoid ________________________ of the profit earned by the business.

bonus and goodwill

Common approaches to recognizing intangible factors that a new partner may bring to a partnership include the __________________________ methods.

mutual agency

The legal term stating that each partner possesses the right to incur liabilities on behalf of the partnership in the normal course of business is ______________________.

contribution date FV

Despite the notion that a partnership is an extension of its individual partners, a non cash asset contributed to the partnership should be recorded at its _______________________.

capital reclassification

The transfer of ownership may be recorded by a _________________ from the current partners to the new partner.

reduces

Under the bonus method any excess payment to a withdrawing partner beyond his/her capital balance __________________ the capital balances of the remaining partners.

goodwill

Under the goodwill method for recognizing a partner's intangible contribution __________________ is recognized as an asset of the partnership to reflect the intangible contribution.

profit/loss percentages

Under the goodwill method to record a new partner's admission to a partnership, recognition of goodwill to the original partners is equitably allocated according to the ______________________.

profit and loss sharing ratios

Upon a partner's withdrawal from a partnership, the goodwill will credit each partner's capital account for their share of goodwill according to their ______________________.

Increase

If an individual partner's allocation of annual partnership profits exceeds his or her annual partnership withdrawals, what net effect should be reflected in the that partner's capital account?

legal dissolution

Any change in the set of specific individuals that comprise a partnership automatically leads to a _______________________.

capital account

At year end, a partner's drawing accounts closed to the partner's ____________________.

capital credit

Under the goodwill method for recognizing a partner's intangible contribution the partner deemed to be contributing goodwill is given a _____________________ to recognize the asset brought to the partnership.

no impact

When a new partner is admitted to a partnership as a result of a cash transaction between individual parties, the new partner's admission has _____________________ on partnership tangible assets and liabilities.

personally liability exposure

The emergence of several alternative partnership forms derives from the desire to avoid double taxation and limit the __________________________ of individual partners.

credit

When a partners make cash contributions to a partnership, a _______________ to each individual partner's capital account records the contribution.