Badger and Fox are forming a partnership. Badger invests a building that has a market value of $350,000; the partnership assumes responsibility for a $125,000 note secured by a mortgage on the property. Fox invests $100,000 in cash and equipment that has a market value of $75,000. For the partnership, the amounts recorded for Badger's Capital account and for Fox's Capital account are:
A) Badger, Capital $350,000; Fox, Capital $175,000.
B) Badger, Capital $225,000; Fox, Capital $100,000.
C) Badger, Capital $225,000; Fox, Capital $75,000.
D) Badger, Capital $350,000; Fox, Capital $100,000.
E) Badger, Capital $225,000; Fox, Capital $175,000.

Question

Quizplus · Accepted Answer

Badger's investment is the building's market value ($350,000) minus the note assumed by the partnership ($125,000), resulting in $225,000. Fox's investment includes $100,000 in cash plus equipment valued at $75,000, totaling $175,000.

Badger and Fox Are Forming a Partnership