Shaun and Rick are partners. Shaun has a capital balance of $10,000 and Rick has a capital balance of $8,000. Edwin invests a building with a current market value of $6,000 to acquire an interest in the new partnership. Which of the following is true of the effect of the transaction on the balance sheet? (Assume no bonus to any partner.)

Question

Quizplus · Accepted Answer

When Edwin invests the building, it becomes a new asset for the partnership, and its market value of $6,000 is added to the total assets on the balance sheet. Edwin also acquires an interest in the partnership, which increases the equity of the partnership by $6,000. Therefore, both assets and equity will increase by $6,000, making option A the correct answer. There is no mention of any liabilities being affected by this transaction, so option B and D are incorrect. Option C is also incorrect as it states that both assets and equity will decrease, which is not the case.

Shaun and Rick Are Partners