Henry Jones contributed equipment, inventory, and $44,000 cash to a partnership. The equipment had a book value of $35,000 and market value of $28,000. The inventory had a book value of $25,000 but only had a market value of $12,000 due to obsolescence. The partnership also assumed a $15,000 note payable owed by Henry that was originally used to purchase the equipment.What amount should be recorded to Henry's capital account?

Question

Henry Jones contributed equipment, inventory, and $44,000 cash to a partnership. The equipment had a book value of $35,000 and market value of $28,000. The inventory had a book value of $25,000 but only had a market value of $12,000 due to obsolescence. The partnership also assumed a $15,000 note payable owed by Henry that was originally used to purchase the equipment.​What amount should be recorded to Henry's capital account?

Quizplus · Accepted Answer

The capital account should reflect the fair market value of the assets contributed minus any liabilities assumed by the partnership. Equipment is recorded at $28,000, inventory at $12,000, and cash at $44,000. The total is $84,000. Subtract the $15,000 note payable assumed by the partnership, resulting in $69,000.

Henry Jones Contributed Equipment, Inventory, and $44,000 Cash to a Partnership