O'Brien is investing in a partnership with Skanes. O'Brien contributes equipment that originally cost $21,000, has a carrying amount of $14,000, and a fair value of $16,000. The entry that the partnership makes to record O'Brien's initial contribution includes a
A) debit to Equipment for $14,000.
B) debit to Equipment for $21,000.
C) debit to Equipment for $16,000.
D) credit to Accumulated Depreciation for $7,000.

Question

Quizplus · Accepted Answer

When a partner contributes non-cash assets to a partnership, the entry to record the contribution is made at the fair value of the asset contributed. In this case, O'Brien's equipment has a fair value of $16,000, so the partnership should debit Equipment for $16,000 to reflect its contribution at the correct value.

O'Brien Is Investing in a Partnership with Skanes