When two proprietors decide to combine their businesses and form a partnership, GAAP usually requires that noncash assets be taken over at their:
A) residual value on the date of the formation of the partnership.
B) book value on the date of the partnership.
C) fair market value on the date of the partnership.
D) historical cost on the date of the partnership.

Question

Quizplus · Accepted Answer

When forming a partnership, GAAP typically requires that noncash assets contributed by the partners be recorded at their fair market value on the date of the partnership formation. This approach ensures that the partnership's balance sheet accurately reflects the current value of its assets.

When Two Proprietors Decide to Combine Their Businesses and Form