Question

Hannah Johnson contributed equipment, inventory, and $53,000 cash to the partnership. The equipment had a book value of $25,000 and a market value of $28,000. The inventory had a book value of $50,000, but only had a market value of $15,000 due to obsolescence. The partnership also assumed a $12,000 note payable owed by Hannah that was originally used to purchase the equipment. ​ What amount should be recorded to Hannah’s capital account?

Answer 1

Answer:

$84,000

Explanation:

Given that,

Cash = $53,000

Equipment market value = $28,000

Inventory market value = $15,000

Note payable owed by Hannah = $12,000

As Assets contributed to the business are recorded at the fair market value.

Hannah’s capital account:

= Cash + Equipment + Inventory - Notes payable

= $53,000 + $28,000 + $15,000 - $12,000

= $84,000

Therefore, the amount of $84,000 should be recorded to Hannah’s capital account.