Question

Partnership's asset accounts should be changed from cost to fair market value when a new partner is admitted to a firm or an existing partner withdraws or dies.

a) true
b) false

Answer 1

It is true.

Step-by-step explanation:

When a new partner is admitted, there is a need to value the partnership's assets at fair value i.e at market value to be able to ascertain the current value of the business . This will be used as basis for calculating the shareholding of the new partners based on his contribution.

In the same manner, when a partner is exiting, it will helps in calculating the amount that is payable to the exiting partner.