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JAMB Principles of Accounts 1998 Question 34

Question 34

Partnership Accounts

When forming a partnership, new partners should record non-monetary assets on the new partnership's books at

  1. A.their current fair market values
  2. B.their historical costs when first used
  3. C.their historical costs when first purchased by each new partner
  4. D.the highest values practical so that future income tax deductions are maximized.
Show the answer and explanation

Answer: A (their current fair market values)

Explanation

Assets brought in are recorded at fair value so each partner is credited fairly.