Final answer:
Revaluation of assets and liabilities when a new partner is admitted into a partnership is necessary to ensure fairness and current market value alignment of the business. Banking assets, such as loans, entail risk and are dependent on borrowers' repayment, affecting their valuation. Loan values in the secondary market are influenced by the borrower's reliability and shifts in the economy's interest rates.
Step-by-step explanation:
There is a need for the revaluation of assets and liabilities upon the admission of a new partner into a partnership because it ensures that the value of the partnership's assets and liabilities reflects their current market value. This reassessment of value ensures fairness to all parties as the new partner's investment and sharing of future profits or losses are based on up-to-date and accurate valuations. The revaluation can lead to adjustments in the capital accounts of the existing partners, maintaining a balanced relationship among the partners' capital contributions.
When a bank lists money under assets on a balance sheet, it may include loans given out to customers, which are not actually held as cash in the bank but are expected to be repaid with interest. The bank's assets thus depend on the repayment of these loans, which can introduce risk, especially if the loans are made to entities in different countries or if they are more complex than standard loans. The valuation of these assets can be challenging and is subject to various estimates and judgments.
Regarding the purchase of loans on the secondary market, several factors influence how much a bank or financial services company might be willing to pay for these assets. For instance, you would pay less for a loan if a. The borrower has been late on loan payments reflecting a higher risk of default; b. Interest rates have risen since the loan was made, making the existing loan less attractive compared to new loans at higher rates; c. You would pay more if the borrower is a firm that has declared high profits, as this indicates financial stability and lower risk; d. Interest rates have fallen since the loan was made, making the loan's higher rate more attractive compared to the current lower rates in the market.