Assets contributed to a partnership by a partner would be recorded at:
A)Historical cost.
B)Fair market value.
C)Cost less depreciation.
D)Potential value.

Question

Quizplus · Accepted Answer

Assets contributed to a partnership by a partner should be recorded at fair market value, which is the amount that would be received if the assets were sold in an arm's length transaction between knowledgeable and willing parties. This is because in a partnership, each partner contributes assets in exchange for a proportionate ownership interest in the partnership. If assets were recorded at historical cost or cost less depreciation, this could result in inequitable treatment of partners if the assets have appreciated in value since their acquisition. Recording assets at potential value is not a recognized accounting principle.

Assets Contributed to a Partnership by a Partner Would Be