Thomas Engel contributed equipment, inventory, and $45,000 cash to a partnership. The equipment had a book value of $25,000 and market value of $30,000. The inventory has a book value of $50,000 but only had a market value of $25,000 due to obsolescence. The partnership also assumed a $20,000 note payable owed by Thomas that was originally used to purchase the equipment. What amount (s) should be recorded in Thomas's capital account

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26 February, 09:53

Thomas Engel contributed equipment, inventory, and $45,000 cash to a partnership. The equipment had a book value of $25,000 and market value of $30,000. The inventory has a book value of $50,000 but only had a market value of $25,000 due to obsolescence. The partnership also assumed a $20,000 note payable owed by Thomas that was originally used to purchase the equipment. What amount (s) should be recorded in Thomas's capital account

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Austin Rivas · Answer 1

Thomas capital

Equipment $30,000

Inventory 25,000

Cash 45,000

Total 100,000

Explanation:

Equipment : thebook value is $25,000 while the market value is $30,000. the market value of the equipment will be used.

Inventory : the book value is $50,000 while the market value is $25,000. As a result of obsolescence, the inventory will be value at lower of cost and net realizable value (IAS2). therefore, $25,000 will be recognized for the inventory in the determination of Thomas capital

Cash: there is no changes in cash contributed.

Patrick Marsh · Answer 2

Cash contribution by Thomas = $45,000

Market value of the Inventory amount to = $ 25,000

Market value of the Equipment = $ 30,000

Notes payable by Thomas for the purchase of the equipment = $ 20,000

hence the amount recorded in Thomas account would be = 45000 + 25000 + 30000 + 20000

= $120,000