Sam is investing in a partnership with Jerry. Sam contributes equipment that originally cost $63,000, has a book value of $30,000, and a fair market value of $39,000. The entry that the partnership makes to record Sam's initial contribution includes a

Question

Quizplus · Accepted Answer

The partnership should record the equipment at its fair market value of $39,000, so the entry would be a debit to Equipment for $39,000. The book value and original cost are not relevant for determining the partnership's basis in the asset. And since there is no information given about accumulated depreciation, option D is incorrect. Option A is also incorrect because it only reflects the difference between the original cost and book value, but the fair market value is the relevant amount for partnership accounting.

Sam Is Investing in a Partnership with Jerry