A partner contributes plant and equipment when a partnership is established. The amount recognised by the partnership for this contributed asset is equal to:

Question

Quizplus · Accepted Answer

The amount recognised by the partnership for contributed assets is generally based on their fair value at the date of contribution. This is because fair value represents the price that would be received to sell the asset in an orderly transaction between market participants at the measurement date. The carrying amount and the amount paid by the contributing partner may not reflect the true economic value of the asset. Similarly, it would not be appropriate to allocate the same proportion of contributions by other partners as this would not reflect the relative value of the contributed asset. Therefore, B is the best choice.

A Partner Contributes Plant and Equipment When a Partnership Is