The correct answer is: C. mutual benefit of old and new partners.
Revaluation of assets and liabilities is done to ensure that the partnership’s financial statements are accurate and reflect the fair market value of the assets and liabilities. This is important for both the old and new partners, as it will affect the amount of capital each partner contributes to the partnership and the amount of profit or loss each partner will share.
The revaluation of assets and liabilities may also result in a change in the profit-sharing ratio of the partners. This is because the new partner will be entitled to a share of the profits that is based on the fair market value of the assets and liabilities, rather than the book value.
In conclusion, revaluation of assets and liabilities is done for the mutual benefit of both the old and new partners. It ensures that the partnership’s financial statements are accurate and reflects the fair market value of the assets and liabilities, and it may also result in a change in the profit-sharing ratio of the partners.
Here is a brief explanation of each option:
- Option A: The benefit of old partners. This is not the correct answer because revaluation of assets and liabilities is done for the mutual benefit of both the old and new partners.
- Option B: The benefit of new partner. This is not the correct answer because revaluation of assets and liabilities is done for the mutual benefit of both the old and new partners.
- Option C: The mutual benefit of old and new partners. This is the correct answer because revaluation of assets and liabilities is done to ensure that the partnership’s financial statements are accurate and reflects the fair market value of the assets and liabilities, which is important for both the old and new partners.
- Option D: The benefit of old partners who are sacrificing. This is not the correct answer because revaluation of assets and liabilities is done for the mutual benefit of both the old and new partners, regardless of whether the old partners are sacrificing.