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JAMB Principles of Accounts 2000 Question 31

Question 31

Partnership Admission, Retirement and Dissolution

An outright sale of a partnership amounts to the

  1. A.compensation of vendors by the purchase
  2. B.admission of a new partner
  3. C.purchase of rights of a dead partner
  4. D.change of sharing ratio of vendors.
Show the answer and explanation

Answer: A (compensation of vendors by the purchase)

Explanation

In an outright sale the buyer takes over the business and compensates the partners (vendors) with the purchase consideration.