If a new partner acquires partnership interest directly from...

If a new partner acquires partnership interest directly from the partners rather than from the partnership, a. no entry is required. b. the existing partnership is liquidated. c. the partnership assets should not be revalued because this type of transaction does not result in partnership dissolution. d. the existing partners’ capital accounts are reduced and the new partner’s capital account is increased.

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Transcript

00:01 Hello students, here is a question, if a new partner acquired the partnership instead of direct form of a partner rather than the form of partnership? we have four options given here.

00:11 The first is no entry is required.

00:14 Option b is the existing partner is liquidated.

00:18 And option c is so let us write down the options.

00:22 So the option a is no entry is required and option b is the existing partnership is liquidated.

00:38 The existing partnership is liquidated and option c is the partnership assets should not be revalued.

00:57 The partnership assets should not be revalued because this type of transaction that does not result in partnership dissolution.

01:15 And option d is the existing partnership, the existing partners capital account are reduced, are reduced and the new partner and new partners capital account is increased.

01:47 So these are the four options we have.

01:50 So let us discuss the answer.

01:51 A new partner is acquiring partnership instead of direct from the partners.

01:56 So not for the partnership itself.

01:57 This means the existing partner are selling a portion of their ownership to the partner.

02:02 So option a is no entry is required.

02:05 This is incorrect answer because they should be an entry to reflect the changes in ownership among the partners...