When a new partner is admitted into a partnership and the capital of the old partners decreases,which of the following explains the reason for the decrease?
I.Undervalued liabilities were written up to their fair values.
II.Undervalued assets were written up to their fair values.
A)I only
B)II only
C)Both I and II
D)Neither I nor II

Question

Quizplus · Accepted Answer

When undervalued liabilities are written up to their fair values, it increases the liabilities on the balance sheet, which decreases the net capital of the existing partners.

When a New Partner Is Admitted into a Partnership and the Capital