Question

Two individuals who were previously sole proprietors form a partnership. Property other than cash that is part of the initial investment in the partnership is recorded for financial accounting purposes at theA)Proprietors' book values of the property on the date of the investment.B)Proprietors' book values or the property's fair value on the date of the investment, whichever is higher.C)Proprietors' book values or the property's fair value on the date of the investment, whichever is lower.D)Property's fair value at the date of the investment.

Answer 1

Answer:

D) Property's fair value at the date of the investment.

Explanation:

When new business is formed from closing the old one, all assets are recorded at fair value.

Thus, all the assets other than cash shall be recorded at their respective fair values in the new business which is a partnership, as the cost or historical value will not display their proportional contributions properly.

Therefore, correct statement is

D) Property's fair value at the date of the investment.