Majeau and Horcica are forming a partnership.Majeau will invest equipment that currently is being used by another business owned by Majeau.The equipment has a fair market value of $45,000.Also,the partnership will assume responsibility for a $10,000 note secured the equipment.Horcica will invest $25,000 cash.On the books of the partnership,the amount to be recorded as a credit to Majeau's capital account is

Question

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The fair market value of the equipment being contributed by Majeau is $45,000, and the partnership is assuming a $10,000 note secured by the equipment. Therefore, Majeau's total contribution to the partnership is $55,000 ($45,000 + $10,000). However, Majeau is only receiving credit for the equipment, not the note, so the amount to be recorded as a credit to Majeau's capital account is $45,000. Therefore, the answer is A) $35,000 ($55,000 - $45,000).

Majeau and Horcica Are Forming a Partnership