Robert Johnson contributed equipment, inventory, and $42,000 cash to the partnership. The equipment had a book value of $25,000 and market value of $28,000. The inventory has a book value of $50,000, but only had a market value of $15,000 due to obsolescence. The partnership also assumed a $12,000 note payable owed by Robert that was originally used to purchase the equipment. What amount should Robert's capital account be recorded?

Question

Quizplus · Accepted Answer

The capital account of Robert Johnson should be recorded as follows:
Equipment (market value) = $28,000
Inventory (market value) = $15,000
Cash = $42,000
Total contribution = $85,000
Less: Note payable assumed = $12,000
Total capital contribution = $73,000.

Robert Johnson Contributed Equipment, Inventory, and $42,000 Cash to the Partnership