On November 1,Jackson and Kiln formed a partnership with Jackson contributing land valued at $100,000 and a building valued at $125,000.Kiln contributed $55,000 in cash.The partnership assumed the mortgage on Jackson's property of $85,000.Profits and losses are to be shared equally.What are the balances of the partner's capital accounts after recording these transactions?

Question

Quizplus · Accepted Answer

Jackson contributed a total of $225,000 ($100,000 + $125,000) worth of assets but the partnership assumed the mortgage of $85,000, so Jackson's net contribution is $140,000. Kiln contributed $55,000 in cash. Since profits and losses are shared equally, the initial capital balance for each partner would be $97,500 (($140,000-$85,000)/2) for Jackson and $97,500 (($55,000)/2) for Kiln. Therefore, the balances of the partners' capital accounts after recording these transactions would be:

Jackson: $140,000 (initial capital balance) + $97,500 (net contribution) = $237,500

Kiln: $97,500 (initial capital balance) + $55,000 (net contribution) = $152,500

Therefore, the correct answer is option C: Jackson: $140,000 and Kiln: $55,000.

On November 1,Jackson and Kiln Formed a Partnership with Jackson