A 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.

Question

Quizplus · Accepted Answer

When a new partner is admitted to a firm or an existing partner withdraws or dies, the partnership agreement may require that the assets of the partnership be revalued at their fair market value. This is because the admission or withdrawal of a partner can significantly impact the value of the partnership's assets. Fair market value is the price at which the assets could be sold in an arm's length transaction between a willing buyer and a willing seller.

A Partnership's Asset Accounts Should Be Changed from Cost to Fair