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20 December, 11:20

Griffin and Rhodes formed a partnership on January 1, 2009. Griffin contributed cash of $120,000 and Rhodes contributed land with a fair value of $160,000. The partnership assumed the mortgage on the land which amounted to $40,000 on January 1. Rhodes originally paid $90,000 for the land. On July 31, 2009, the partnership sold the land for $190,000. Assuming Griffin and Rhodes share profits and losses equally, how much of the gain from sale of land should be credited to Griffin for financial accounting purposes?

A. $0

B. $15,000

C. $35,000

D. $45,000

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Answers (1)
  1. 20 December, 13:41
    0
    correct option is B. $15,000

    Explanation:

    given data

    contributed cash = $120,000

    Fair Value of land = $160,000

    originally paid = $90,000

    Sale value of land = $190,000

    to find out

    how much of the gain from sale of land should be credited to Griffin for financial accounting purposes

    solution

    gain on sale is here as

    gain on sale = Sale value of land - Fair Value of land -

    Gain on sale of land = $190,000 - $160,000

    Gain on sale of land = $30000

    split the $30000 between the equal partners for a total gain credited to Griffin

    total gain credited to Griffin = $15000

    so correct option is B. $15,000
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