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 Fontaine's Capital account and for Monroe's Capital account are:
A) Fontaine, Capital $175,000; Monroe, Capital $45,000.
B) Fontaine, Capital $250,000; Monroe, Capital $100,000.
C) Fontaine, Capital $0; Monroe, Capital $100,000.
D) Fontaine, Capital $250,000; Monroe, Capital $155,000.
E) Fontaine, Capital $175,000; Monroe, Capital $155,000.

Question

Quizplus · Accepted Answer

Fontaine's Capital account is $175,000 ($250,000 market value of the building - $75,000 mortgage). Monroe's Capital account is $155,000 ($100,000 cash + $55,000 equipment).

Fontaine and Monroe Are Forming a Partnership