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

Question

Business

Edgar Ayers

26 November, 23:44

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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Cornelius Jarvis · 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.

Kai Garner · 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