Question

When an additional partner is admitted to a partnership by contribution of assets to the partnership, a.the amount of the cash contribution is the same as the amount of the debit to the new partner's capital account b.the total assets of the partnership do not change c.the total of the owners' equity accounts increases d.no liabilities can be contributed at the same time

Answer 1

Answer:

Correct answer is c, the total of owner's equity account increases

Explanation:

When an additional partner is admitted to a partnership by contributing an asset to the partnership, the amount debited should be the fair market value of an asset less the obligation absorbed by the partnership in connection to the asset contributed if there is. And the capital credited should be based on the agreed interest by the partners. In effect, the Asset of the partnership will increase same goes with the partners' equity. The capital credited to the partnership will cause the increase of the partner's equity as a result of the admission of new partner.