Brown invests cash of $20,000 and a building with a cost of $350,000 and accumulated amortization to date of $195,000 in the Brown and Winter Partnership.The building has a current market value of $325,000.A mortgage payable of $105,000 is outstanding on the building and will be assumed by the partnership.Brown's capital account would be credited for:

Question

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Brown's capital account would be credited for the cash investment of $20,000 plus the net book value of the building. The net book value of the building is calculated as its cost ($350,000) minus accumulated amortization ($195,000), which equals $155,000. The mortgage does not affect the capital account credit because it is a liability assumed by the partnership. Therefore, the total credit to Brown's capital account is $20,000 (cash) + $155,000 (building net book value) = $175,000. However, the correct calculation based on the provided options and considering the error in explanation, the intended correct answer seems to be $70,000, which is not correct based on the standard accounting treatment. The correct calculation should indeed result in $175,000 based on the given data, but since that option is not correctly aligned with the explanation, it appears there was a mistake in the explanation process. The correct approach to calculate the capital account credit should consider the value of the assets contributed (cash + net book value of the building) and not include the mortgage payable in this calculation directly. However, given the options and the common mistake in interpreting the question, there seems to be confusion in the explanation provided.

Brown Invests Cash of $20,000 and a Building with a Cost