Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000.
-For the partnership, the amounts recorded for the building and for Fontaine's Capital account are:

Question

Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000. 
-For the partnership, the amounts recorded for the building and for Fontaine's Capital account are:

Quizplus · Accepted Answer

The building is recorded at its fair market value of $250,000, but the partnership also assumes responsibility for the $75,000 mortgage, so the net amount recorded for the building is $250,000 - $75,000 = $175,000. Fontaine's Capital account will be credited for the amount of the building contributed, so it will be $175,000. Therefore, the correct amounts recorded are Building $175,000 and Fontaine, Capital $175,000.

Fontaine and Monroe Are Forming a Partnership