Danny and Vicky are forming a partnership. Danny will invest a truck with a book value of $10,000 and a fair market value of $14,000. Vicky will invest a building with a book value of $30,000 and a fair market value of $42,000 with a mortgage of $15,000. What amount should be recorded in Vicky's capital account?

Question

Quizplus · Accepted Answer

When one partner contributes an asset to a partnership, the asset is recorded at its fair market value in the capital accounts of both partners. In this case, Danny's truck should be recorded in both Danny and Vicky's capital accounts at a fair market value of $14,000.

For Vicky's building, we need to subtract the mortgage from the fair market value to determine the portion that Vicky is contributing. Thus, Vicky's contribution is $42,000 - $15,000 = $27,000.

Therefore, the amount that should be recorded in Vicky's capital account is $27,000.

Danny and Vicky Are Forming a Partnership