When a New Person Is Admitted into a Partnership by Investing

question 18

Multiple Choice

When a new person is admitted into a partnership by investing assets in the partnership at book value,the new person:

• A)pays cash directly to existing partners based on the market value of the partnership's assets.
• B)transfers assets to the partnership which are equal in value to the existing partners' capital balances (no bonus).
• C)pays cash directly to the existing partners in amounts equal to their respective capital balances.
• D)transfers assets to the partnership which are equal in value to the market value of the partnership's assets.

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Definitions:

Book Value

The net value of a company's assets found on its balance sheet, calculated as total assets minus intangible assets and liabilities.

Carrying Amount

The value at which an asset or liability is recorded on the balance sheet, including depreciation or amortization.

Reasonable Degree

A reasonable degree refers to an acceptable level of certainty or accuracy, often used to describe the precision expected in estimates or judgments.

Revenue Recognition

Accounting principle that outlines the specific conditions under which revenue is recognized and dictates how to account for it on the financial statements.