Question

As part of the initial investment, a partner contributes equipment that had originally cost $100,000 and on which accumulated depreciation of $75,000 has been recorded. If similar equipment would cost $150,000 to replace and the partners agree on a valuation of $40,000 for the contributed equipment, what amount should be debited to the equipment account?

Answer 1

Answer:

Explanation:

$100,000 debit to the Equipment asset account because you are recording the actual original cost of the equipment (as is required by the Cost Principle of Depreciation). You should also credit the Accumulated Depreciation: Equipment account for $75,000 to show that the equipment has already depreciated for this amount.