Answered: Rose and Yana formes a partnership.…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Rose and Yana formes a partnership. Rose contributed inventory with a fair market value that is lower than its book value. Yana contributed real estate with fair market value that is higher than its book value. At what amount should the partnership record each of the following assets?

Inventory Real estate

a. Book Value Book Value

b. Fair Market Value Book Value

c. Book Value Fair Market Value

d. Fair Market Value Fair Market Value

choose the correct answer and explain.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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