When Two Proprietors Decide to Combine Their Businesses and Form

question 61

Multiple Choice

When two proprietors decide to combine their businesses and form a partnership, GAAP usually requires that noncash assets be taken over at their:

• A) residual value on the date of the formation of the partnership.
• B) book value on the date of the partnership.
• C) fair market value on the date of the partnership.
• D) historical cost on the date of the partnership.

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Definitions:

Consequential Damages

Financial losses suffered as a consequence of a breach of contract, beyond the immediate scope of the direct damages, not always recoverable under certain contracts.

Special Circumstances

Specific conditions or facts that can affect the outcome of a legal proceeding or the application of laws.

Contract Itself

The physical document or legally binding agreement that outlines the terms and conditions agreed upon by the parties involved.

Common Law

A legal system based on custom, court rulings, and past legal precedents rather than on written laws.