Asked by Adeyemi Adeyolanu on Jun 09, 2024
Verified
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.
Fair Market Value
The price at which a property would sell under normal conditions in an open and competitive market.
Book Value
The net value of a company's assets as recorded on the balance sheet, calculated by subtracting liabilities from total assets.
Historical Cost
The actual cost of an asset at time of purchase.
- Outline the procedure for the commencement of partnership investments and the strategy for recording and evaluating assets.
Verified Answer
MD
makayla davisJun 13, 2024
Final Answer :
C
Explanation :
When forming a partnership, GAAP typically requires that noncash assets contributed by the partners be recorded at their fair market value on the date of the partnership formation. This approach ensures that the partnership's balance sheet accurately reflects the current value of its assets.
Learning Objectives
- Outline the procedure for the commencement of partnership investments and the strategy for recording and evaluating assets.