Hannah Johnson contributed equipment, inventory, and $54,500 cash to a partnersh

Question

Hannah Johnson contributed equipment, inventory, and $54,500 cash to a partnership. The equipment had a book value of $27,000 and a market value of $34,500. The inventory had a book value of $57,500 but only had a market value of $11,400 due to obsolescence. The partnership also assumed a $12,900 note payable owed by Hannah that was originally used to purchase the equipment.

What amount should be recorded to Hannah's capital account?

a.$126,100

b.$87,500

c.$146,500

d.$113,300

Immediately prior to the admission of Allen, the Sanson-Jeremy Partnership assets had been adjusted to current market prices and the capital balances of Sanson and Jeremy were $80,000 and $120,000, respectively. If the parties agree that the business is worth $240,000, what is the amount of bonus that should be recognized in the accounts at the admission of Allen?

a.$40,000

b.$100,000

c.$80,000

d.$60,000

Seth and Beth have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%; salary allowances of $27,000 and $18,000, respectively; and the remainder to be divided equally. How much of the net income of $42,000 is allocated to Seth?

a.$23,000

b.$0

c.$32,000

d.$20,000

Explanation / Answer

In accounting asset are recorded at their book value and not their market value

So total contribution of Johnson would be = Inventory + Equipment + Cash – notes payable

                                                             = 57500 + 27000 + 54500 – 12900

                                                               = 126100

So correct answer is A.

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