5. Roberts and Smith drafted a partnership agreement that lists the following as

Question

5. Roberts and Smith drafted a partnership agreement that lists the following assets contributed at the partnership's formation:

The building is subject to a mortgage of $10,000, which the partnership has assumed. The partnership agreement also specifies that profits and losses are to be distributed evenly. What amounts should be recorded as capital for Roberts and Smith at the formation of the partnership?

Option A

Option B

Option C

Option D

Contributed by Roberts Smith Cash $20,000 $30,000 Inventory 0 15,000 Building 0 40,000 Furniture & Equipment 15,000 0

Explanation / Answer

Capital of roberts = 20000 + 15000 = 35000

Capital of smith = 30000 + 15000 + 40000 = 85000

Answer will be Option A

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