Question

A partnership is formed by two individuals who were previously sole proprietors. Property other than cash that is part of the initial investment in the partnership would be recorded for financial reporting purposes at the ___________________________ .

A)Proprietor's book values or the fair value of the property at the date of the investment, whichever is higher.
B)Proprietor's book values or the fair value of the property at the date of the investment, whichever is lower.
C)Proprietor's book values of the property at the date of the investment.
D)None of the above.
E)Fair value of the property at the date of the investment

Answer 1

Answer: A partnership is formed by two individuals who were previously sole proprietors. Property other than cash that is part of the initial investment in the partnership would be recorded for financial reporting purposes at the "E)Fair value of the property at the date of the investment".

Explanation: In the constitution of a company the assets contributed must be measured at their market value.