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MANAGING PROJECTS

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Projects represent nonroutine business activities that often have long-term strategic ramifications for a firm. In this chapter, we examined how projects differ from routine business activities and discussed the major phases of projects. We noted how environmental changes have resulted in increased attention being paid to projects and project management over the past decade. In the second half of the chapter, we introduced some basic tools that businesses can use when planning for and controlling projects. Both Gantt charts and network diagrams give managers a visual picture of how a project is going. Network diagrams have the added advantage of showing the precedence between activities, as well as the critical path(s). We wrapped up the chapter by showing how these concepts are embedded in inexpensive yet powerful software packages such as Microsoft Project. If you want to learn more about project management, we encourage you to take a look at the Web site for the Proj...
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Accounting for Partnerships

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CONCEPTUAL
Partnerships are voluntary associations, involve partnership agreements, have limited life, are not subject to income tax, include mutual agency, and have unlimited liability. Organizations that combine selected characteristics of partnerships and corporations include limited partnerships, limited liability partnerships, S corporations, and limited liability companies.
ANALYTICAL
Partner return on equity provides each partner an assessment of his or her return on equity invested in the partnership.
PROCEDURAL
A partner’s initial investment is recorded at the market value of the assets contributed to the partnership.
A partnership agreement should specify how to allocate partnership income or loss among partners. Allocation can be based on a stated ratio, capital balances, or salary and interest allowances to compensate partners for differences in their service and capital contributions.
When a new partner buys a partnership interest directly from one or more existing partners, the amount of cash paid from one partner to another does not affect the partnership total recorded equity. When a new partner purchases equity by investing additional assets in the partnership, the new partner’s investment can yield a bonus either to existing partners or to the new partner. The entry to record a withdrawal can involve payment from either (1) the existing partners’ personal assets or (2) partnership assets. The latter can yield a bonus to either the withdrawing or remaining partners.
When a partnership is liquidated, losses and gains from selling partnership assets are allocated to the partners according to their income-and-loss-sharing ratio. If a partner’s capital account has a deficiency that the partner cannot pay, the other partners share the deficit according to their relative income-and-loss-sharing ratio.
Guidance Answers to Decision Ethics
Financial Planner
The partnership agreement apparently fails to mention liabilities or use the term net assets. To give the estate one-third of total assets is not fair to the remaining partners because if the partner had lived and the partners had decided to liquidate, the liabilities would need to be paid out of assets before any liquidation. Also, a settlement based on the deceased partner’s recorded equity would fail to recognize excess of current value over book value. This value increase would be realized if the partnership were liquidated. A fair settlement would seem to be a payment to the estate for the balance of the deceased partner’s equity based on the current value of net assets.

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