diff --git a/activeresource/lib/active_resource/base.rb b/activeresource/lib/active_resource/base.rb
index 3016f62b802ac..915021a7b3001 100644
--- a/activeresource/lib/active_resource/base.rb
+++ b/activeresource/lib/active_resource/base.rb
@@ -886,7 +886,7 @@ def instantiate_collection(collection, prefix_options = {})
         end
 
         def instantiate_record(record, prefix_options = {})
-          new(record).tap do |resource|
+          new(record, true).tap do |resource|
             resource.prefix_options = prefix_options
           end
         end
@@ -959,9 +959,10 @@ def known_attributes
     #
     #   my_other_course = Course.new(:name => "Philosophy: Reason and Being", :lecturer => "Ralph Cling")
     #   my_other_course.save
-    def initialize(attributes = {})
+    def initialize(attributes = {}, persisted = false)
       @attributes     = {}.with_indifferent_access
       @prefix_options = {}
+      @persisted = persisted
       load(attributes)
     end
 
@@ -1011,7 +1012,7 @@ def clone
     #   is_new.new? # => false
     #
     def new?
-      id.nil?
+      !persisted?
     end
     alias :new_record? :new?
 
@@ -1028,7 +1029,7 @@ def new?
     #   not_persisted.persisted? # => true
     #
     def persisted?
-      !new?
+      @persisted
     end
 
     # Gets the <tt>\id</tt> attribute of the resource.
@@ -1317,6 +1318,7 @@ def create
       def load_attributes_from_response(response)
         if !response['Content-Length'].blank? && response['Content-Length'] != "0" && !response.body.nil? && response.body.strip.size > 0
           load(self.class.format.decode(response.body))
+          @persisted = true
         end
       end
 
diff --git a/activeresource/test/cases/base/custom_methods_test.rb b/activeresource/test/cases/base/custom_methods_test.rb
index 459d33c24fa97..0fbf94bc0e992 100644
--- a/activeresource/test/cases/base/custom_methods_test.rb
+++ b/activeresource/test/cases/base/custom_methods_test.rb
@@ -91,7 +91,7 @@ def test_custom_new_element_method
                    201, {'Location' => '/people/1/addresses/2.xml'}),
                  addy.post(:link)
 
-    matz = Person.new(:id => 1, :name => 'Matz')
+    matz = Person.find(1)
     assert_equal ActiveResource::Response.new(@matz, 201), matz.post(:register)
   end
 
diff --git a/activeresource/test/cases/base_test.rb b/activeresource/test/cases/base_test.rb
index b5914683e9789..b63a218663774 100644
--- a/activeresource/test/cases/base_test.rb
+++ b/activeresource/test/cases/base_test.rb
@@ -5,6 +5,8 @@
 require "fixtures/sound"
 require "fixtures/beast"
 require "fixtures/proxy"
+require "fixtures/address"
+require "fixtures/subscription_plan"
 require 'active_support/json'
 require 'active_support/ordered_hash'
 require 'active_support/core_ext/hash/conversions'
@@ -1034,4 +1036,51 @@ def test_load_yaml_array
       end
     end
   end
+
+  def test_with_custom_formatter
+    @addresses = [{:id => "1", :street => "1 Infinite Loop", :city => "Cupertino", :state => "CA"}].to_xml(:root => 'addresses')
+
+    ActiveResource::HttpMock.respond_to do |mock|
+      mock.get "/addresses.xml", {}, @addresses, 200
+    end
+
+    # late bind the site
+    AddressResource.site = "http://localhost"
+    addresses = AddressResource.find(:all)
+
+    assert_equal "Cupertino, CA", addresses.first.city_state
+  end
+
+  def test_create_with_custom_primary_key
+    silver_plan = {:code => "silver", :price => 5.00}.to_xml(:root => "plan")
+
+    ActiveResource::HttpMock.respond_to do |mock|
+      mock.post "/plans.xml", {}, silver_plan, 201, 'Location' => '/plans/silver.xml'
+    end
+
+    plan = SubscriptionPlan.new(:code => "silver", :price => 5.00)
+    assert plan.new?
+
+    plan.save!
+    assert !plan.new?
+  end
+
+  def test_update_with_custom_primary_key
+    silver_plan = {:code => "silver", :price => 5.00}.to_xml(:root => "plan")
+    silver_plan_updated = {:code => "silver", :price => 10.00}.to_xml(:root => "plan")
+
+    ActiveResource::HttpMock.respond_to do |mock|
+      mock.get "/plans/silver.xml", {}, silver_plan
+      mock.put "/plans/silver.xml", {}, silver_plan_updated, 201, 'Location' => '/plans/silver.xml'
+    end
+
+    plan = SubscriptionPlan.find("silver")
+    assert !plan.new?
+    assert 5.00, plan.price
+
+    # update price
+    plan.price = 10.00
+    plan.save!
+    assert 10.00, plan.price
+  end
 end
diff --git a/activeresource/test/fixtures/address.rb b/activeresource/test/fixtures/address.rb
new file mode 100644
index 0000000000000..fe921e1595521
--- /dev/null
+++ b/activeresource/test/fixtures/address.rb
@@ -0,0 +1,19 @@
+# turns everyting into the same object
+class AddressXMLFormatter
+  include ActiveResource::Formats::XmlFormat
+
+  def decode(xml)
+    data = ActiveResource::Formats::XmlFormat.decode(xml)
+    # process address fields
+    data.each do |address|
+      address['city_state'] = "#{address['city']}, #{address['state']}"
+    end
+    data
+  end
+
+end
+
+class AddressResource < ActiveResource::Base
+  self.element_name = "address"
+  self.format = AddressXMLFormatter.new
+end
\ No newline at end of file
diff --git a/activeresource/test/fixtures/subscription_plan.rb b/activeresource/test/fixtures/subscription_plan.rb
new file mode 100644
index 0000000000000..e3c2dd9a745fe
--- /dev/null
+++ b/activeresource/test/fixtures/subscription_plan.rb
@@ -0,0 +1,5 @@
+class SubscriptionPlan < ActiveResource::Base
+  self.site = "http://37s.sunrise.i:3000"
+  self.element_name = 'plan'
+  self.primary_key = :code
+end