大四上高级会计上课课件chapter

1、Chapter 3Partnership Liquidation And Incorporation; Joint Ventures2Chapter 3: Scope of ChapterLiquidation of LLPs & LPsMeaning of LiquidationDivision of Losses & GainsDistribution of Cash or Other AssetsCase StudiesPayments to Partners in Different ScenariosPreparation of Cash Distribution PlanIncor

2、poration of LLPJoint VenturesAccounting Methods & Accounting IssuesAccounting for Incorporated & Unincorporated Joint VenturesSEC Enforcement Actions for Wrongful Application of Accounting Standard3Liquidation of PartnershipMeaning of LiquidationDivision of Losses & GainsDistribution of Cash or Othe

3、r AssetsPayments to Partners of an LLPExplanation of different case scenariosIllustrations & Case StudiesPreparation of Cash Distribution ProgramInstallment Payments to PartnersGeneral Principles Guiding Installment Payments4Incorporation of a Limited Liability PartnershipAdvantages of incorporating

4、 LLPAccounting Concerns during IncorporationIllustrations5Joint VenturesDefinitionPresent-Day Joint VenturesAccounting for Corporate or LLC Joint VenturesAccounting for Unincorporated Joint VenturesBrief description of Equity Method of Accounting for Investment in Common StockSEC Enforcement Actions

5、 Dealing with Wrongful Application of Accounting StandardsIllustrations & Case StudiesReview Questions, Problems & Exercises6The Meaning of LiquidationThe LIQUIDATION of a limited liability partnership means winding up its activities, usually by selling assets, paying liabilities, and distributing a

6、ny remaining cash to the partners.7Liquidation of PartnershipThe partnership net assets may be sold as a unit or in installments.The cash received must be used to pay partnership creditors.The accounting records of the partnership should be adjusted and closed and net e of loss for the final period

7、of operations entered in the capital accounts.8Meaning of LiquidationThe liquidation usually starts with “Realization” of non-cash assets.Before any payments to partners, all outside creditors must be paid in full.An unpaid creditor may enforce collection from the personal assets of any solvent part

8、ner whose actions caused the partnerships insolvency.Partnership is treated as an entity for many purposes however, it may not use the shield of a separate entity to protect culpable partners personal assets against the claims of unpaid creditors.9Division of Loss and GainsAlways first divide the lo

9、ss / gain from the realization of non-cash assets before distributing cash.As assets are realized, allocate any gains or loss to partners capital accounts in the e-sharing ratio.All creditors must have been paid before distribution of cash.The final credit balances of the partners capital & loan led

10、ger accounts should be equal to the cash available for distribution.Payments are then made in the amounts of the partners respective equities in the partnership.10Distribution of Cash or Other AssetsPayment of Creditors in full.Payment of Loans from partners.Payment of partners Capital Account Credi

11、t Balances.If a partners capital account has a debit balance or potential debit balance after possible future realization of losses, then any credit balance in partners loan account must be offset against the deficit in the capital account. This is “Right of Offset”.11Payments to Partners After All

12、Non-cash Assets RealizedEquity of Each Partners is Sufficient to Absorb Loss from Realization.Equity of One Partner is not Sufficient to Absorb that Partners Share of Loss from Realization.Equities of Two Partners are not Sufficient to Absorb Their Shares of Loss from Realization.Partnership is Inso

13、lvent but Partners are Solvent.General Partnership is Insolvent and Partners are Insolvent.12Case 1:Equity of One Partner Is Not Sufficient to Absorb That Partners Share of Loss From RealizationThe loss on realization of assets, when distributed in the e-sharing ration, results in a debit balance in

14、 the capital (or capital & loan combined) account of one of the partners.That partner must pay the deficit to the partnership.If the partner is unable to do so, the deficit must be absorbed by other partners as an additional loss to be shared in the same proportion as they have previously shared net

15、 e or losses.13Case 1:Balance Sheet of DE&F LLP (Prior to Liquidation)ASSETSCash $ 20,000Other Assets $ 80,000Total $ 100,000LIABILITIESLiabilities$ 30,000D, Capital$ 40,000E, Capital$ 21,000F, Capital$ 9,000Total$ 100,00014Case 1:Assumptions for the Illustration: e Sharing Ratio is D 20%; E 40%; an

16、d F 40%The other assets of $ 80,000 realized $ 50,000 cashResulting loss of $ 30,000 from RealizationPartner F is charged with 40% of this loss ($ 12,000)Resulting deficit of $ 3,000 in Fs capital a/c1516Case 2:Equities of Two Partners Are Not Sufficient To Absorb Their Shares of Loss From Realizati

17、onInability of a partner to pay the partnership for a capital deficit may cause additional loss to the other partners.A partner may have sufficient capital (or combination of capital & loan accounts) to absorb any direct share of loss on the realization of non-cash assets, but not sufficient to abso

18、rb additional actual or potential losses caused by inability of the partnership to collect the deficit in another partners capital account.17Case 2:Assumptions for IllustrationJKL&M LLP is the partnership firmThe partners J, K, L & M share net e and losses 10%, 20%, 30% and 40% respectivelyTheir cap

19、ital account balances are as shown in statement of realization and liquidation on next slide1819Partnership Is Insolvent but Partners Are SolventIf a limited liability partnership is insolvent, it is unable to pay all outside creditors, and at least one and perhaps all of the partners will have debi

20、t balances in their capital accounts.The partnership creditors may demand payment from any solvent partner whose actions caused the partnerships insolvency, regardless of whether the partners capital account has a debit balance or a credit balance.20Installment Payments to PartnersLiquidation in ins

21、tallments means to realize some assets, paying creditors, paying the remaining available cash to partners, realizing additional assets and making additional cash payments to partners. The liquidation continues until all non-cash assets are realized and all cash has been distributed to creditors and

22、partners.21General Principles Guiding Installment PaymentsAssume a total loss on all remaining non-cash assets and provide for tall possible losses, including potential liquidation costs and unrecorded liabilities.Assume that any partner with a potential capital deficit will be unable to pay any thi

23、ng to the partnership.Distribute each installment of cash as if no more cash will be ing.22General Principles Guiding Installment PaymentsThe liquidator should authorize a cash payment to a partner only if that partner has a capital account ( or capital & loan combined account) credit balance enough

24、 to absorb a portion of maximum possible loss that may incur on realization.23Cash Distribution ProgramWhy to have a Cash Distribution Program?Its more efficient to have in advance a complete “Cash Distribution Program”Ease, efficiency and accuracy of distributing cash as soon as its available24Cash

25、 Distribution ProgramProcedure to develop Cash Distribution Program.Determine the equity of each partner before liquidation.Determine the capital per unit of e (loss) sharing for each partner, by dividing capital account balance by each partners e-sharing ratio.If for some reason, original relations

26、hip among the partners capital account balance has been disrupted, a “Revised Cash Distribution Program” must be prepared.25Liquidation of Limited PartnershipsMost of the procedures & rulings of the liquidation of LLPs and General Partnerships apply to the liquidation of Limited Partnerships.The Uni

27、form Limited Partnership Act provides that after outside creditors have been paid, the equities of the limited partners must be paid before the general partner(s) may receive any cash.Limited partners may agree that one or more of them may have priority over the others regarding payments in liquidation of the limited partnership.26Incorporation of Limited Liability PartnershipWhy to incorporate the Limited Liability Partnership?Limited Liability of stockholders.Ease of attracting additional Capital.Possible e tax advantages.27Incorporation of Limited Liability PartnershipEach