Question

When the hybrid method is used to record the withdrawal of a partner, the partnership

a. revalues assets and liabilities and records goodwill to the continuing partner but not to the withdrawing partner.
b. revalues liabilities but not assets, and no goodwill is recorded.
c. can recognize goodwill but does not revalue assets and liabilities.
d. revalues assets but not liabilities, and records goodwill to the continuing partner but not to the withdrawing partner.
e. revalues assets and liabilities but does not record goodwill.

Answer 1

The hybrid method involves revaluing assets and liabilities and recording goodwill to the continuing partner but not the withdrawing partner when a partner withdraws from a partnership. Therefore correct option is A

Step-by-step explanation:

When the hybrid method is used to record the withdrawal of a partner from a partnership, the correct approach according to generally accepted accounting principles is to: revalue assets and liabilities and record goodwill to the continuing partner but not to the withdrawing partner. Therefore, the correct answer is (a) revalues assets and liabilities and records goodwill to the continuing partner but not to the withdrawing partner. This method reflects the change in the ownership interest and ensures that the books represent the fair value of the assets and liabilities after the partner's withdrawal.