Todd is investing in a partnership with Joseph. Todd contributes equipment that originally cost $42000 has a book value of $20000 and a fair value of $26000. The entry that the partnership makes to record Todd's initial contribution includes a

Question

Quizplus · Accepted Answer

The partnership should record Todd's contribution at its fair value of $26000, which is the amount that the equipment could be sold for currently in the market. Therefore, the entry should include a debit to Equipment for $26000. The book value and original cost are not relevant for determining the contribution amount. There is no mention of accumulated depreciation in the question, so option D can be eliminated. Option A is incorrect because it does not reflect the fair value of the equipment. Option B is incorrect because it includes the original cost of the equipment, which is not relevant.

Todd Is Investing in a Partnership with Joseph