Shaun and Rick are partners.Shaun has a capital balance of $12,000 and Rick has a capital balance of $10,000.Edwin invests a building with a current market value of $8,000 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

The transaction involves the acquisition of a building with a market value of $8,000. This will increase the assets of the partnership by $8,000. Since Edwin is acquiring an interest in the partnership, his investment will be recorded as equity. Therefore, the equity of the partnership will increase by $8,000 as well. There is no effect on liabilities in this transaction. Therefore, option A is correct.

Shaun and Rick Are Partners