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nnのCPA試験の旅 in Hawaii CPA試験の旅 in Hawaii

Hello again!


by nn_77
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Partnership accounting

【4:00】
It was 4:00 when I awoke today. Since it was almost 1:00am when I went to bed, I’d been afraid I’d fail to wake up early in the morning. But, fortunately, I got up at 4:00 as I planned. Though it took some minutes before I crawled out of the bed, I sat at the desk at 4:30am.
I started from where I ended last night, but again I tripped, this time, over the topic of partnership accounting in FAR subject. I recovered my memory of BONUS METHOD & GOODWILL METHOD in accounting for the participation of a new partner. I was almost forgetting these methods!
Since I had a chance to review partnership issue, I went over the topic of DISTRIBUTION (LIQUIDATION) process of partnership in TAX subject.

In Tax accounting subject, the textbook explains that, in the liquidation of P/S, cash distributed to partners are accounted for as Capital Gain / Loss for each partner, and the remaining adjusted basis of P/S interest should be allocated to the distributed asset.

In FAR, however, the textbook says all the property is sold and then converted into money, with which the liability of the P/S is to be repaid, and if cash remain even after the repayment of the loan, then the remainder of the cash is to be allocated to each partner according to the proportion of the Capital accounts (←not Profit & Loss ratio!)

So there’re two possible stories on this theme: One story is that P/S’s properties are totally sold for the repayment of the loan and the remaining money is allocated to partners? The other story is that the both money and properties are distributed to partners and each partner must consider how to report the gain / loss in his / her tax return.

It’s interesting to note that the assumed situation is different between FAR textbook and TAX textbook.

【24:30】
I had to work overtime today, too. Arrived home late at night.
Can I wake up early in the morning as I've been doing in the last two days? I don' t want to stop here.

Bad habit is easy to acqire, and Good one is hard to attain...(sigh)
by nn_77 | 2006-01-31 13:44 | >FARE