Question

As part of the initial investment, a partner contributes equipment that had originally cost $80,000 and on which accumulated depreciation of $50,000 has been recorded. If the partners agree on a valuation of $50,000 for the contributed equipment, what amount should be debited to the equipment account

Answer 1

Answer:

$50,000

Explanation:

Asset valuation involves assigning a monetary value to property and assets. A business undertakes asset valuation before acquiring other firms as a going concern, or before acquiring new assets.

When assets valuation is conducted, the value assigned to each asset is the figure that will be recorded in the accounting books of the acquiring entity.  In this case, the partners will record a value of $50,000, as that is the agreed valuation of the asset. There are several methods of undertaking valuations, such as cost methods, market value method, and standard cost method. Valuation helps a business know the worth of an asset.