Collins and Farina are forming a partnership.Collins is investing a building that has a fair market value of $70,000.However,the building is subject to a $36,000 mortgage.Farina is investing $20,000 cash.The amount to be credited to Collins' capital account is:
A) $70,000.
B) $34,000.
C) $56,000.
D) $44,000.
E) $60,000.

Question

Quizplus · Accepted Answer

To calculate the amount to be credited to Collins' capital account, we need to first determine the net amount of his investment. 
Net amount = Fair market value of building - Mortgage 
Net amount = $70,000 - $36,000 
Net amount = $34,000

Therefore, the amount to be credited to Collins' capital account is $34,000.

Collins and Farina Are Forming a Partnership