Nathan Long is entering into a partnership with Terri. Nathan is investing $4,000 cash and equipment currently on Nathan's books at $16,000 and accumulated depreciation of $4,000. The equipment has a fair market value of $10,000. The entry to record Nathan's investment should be to:
A) debit Cash $4,000; debit Equipment $16,000; credit Accumulated Depreciation $4,000; credit Long, Capital $16,000.
B) debit Cash $4,000; debit Equipment $10,000; credit Accumulated Depreciation $4,000; credit Long, Capital $10,000.
C) debit Long, Capital $12,000; debit Accumulated Depreciation $4,000; credit Cash $4,000; credit Equipment $12,000.
D) debit Cash $4,000; debit Equipment $10,000; credit Long, Capital $14,000.

Question

Quizplus · Accepted Answer

The correct entry to record Nathan's investment includes debiting Cash for the $4,000 cash investment and debiting Equipment for its fair market value of $10,000, since the book value and accumulated depreciation are not relevant for the partnership's accounting. The total investment of $14,000 ($4,000 cash + $10,000 equipment) is credited to Nathan's capital account.

Nathan Long Is Entering into a Partnership with Terri