Exam IIA-CIA-Part3 topic 2 question 36 discussion

Actual exam question from IIA's IIA-CIA-Part3

Question #: 36
Topic #: 2

An internal auditor was asked to review an equal equity partnership. In one sampled transaction, Partner A transferred equipment into the partnership with a self- declared value of $10,000, and Partner B contributed equipment with a self-declared value of $15,000. The capital accounts of each partner were subsequently credited with $12,500. Which of the following statements is true regarding this transaction?

A. The capital accounts of the partners should be increased by the original cost of the contributed equipment.
B. The capital accounts should be increased using a weighted average based on the current percentage of ownership.
C. No action is needed, as the capital account of each partner was increased by the correct amount.
D. The capital accounts of the partners should be increased by the fair market value of their contribution.

Show Suggested Answer

Suggested Answer: C 🗳️

by luluka at Sept. 19, 2021, 10:50 a.m.

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pppbbb

2 months, 1 week ago

The partnership in question is "equal equity partnership", which means the capital injection should be equal, i.e. "The capital accounts of each partner were subsequently credited with $12,500". The declared values of the assets are irrelevant as the “fair value” of the assets had been evaluated at $12500 for Partner A and B's asset.

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Steve8Taiwan

2 months, 2 weeks ago

I would like to know the reason why not D as well.

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Evveee

3 months, 1 week ago

Why not D? It is just a mere valuation of their invested assets and not a share on profit or loss.

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luluka

4 months ago

pls explain why not D

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Exam IIA-CIA-Part3 topic 2 question 36 discussion

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pppbbb

Steve8Taiwan

Evveee

luluka

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