Question

Jones and Smith formed a partnership with each partner contributing the following items: Jones Smith Cash $80,000 $40,000 Building - Cost to Jones 300.000 - Fair Value 400.000 Inventory - Cost to Smith 200.000 - Fair Value 280,000 Mortgage Payable 120.000 Accounts Payable 60.000 Assume that for tax purposes Jones and Smith agree to share equally in the liabilities assumed by the Jones and Smith partnership Refer to the above information. What is the balance in each partner's capital account for financial accounting purposes? Jones Smith $350,000 $270.000 $260,000 $180.000 $360,000 $260.000 $500,000 $300,000 A. Option B OB. Option A OC. Optionc D. Option D

Answer 1

Answer: C Option C (Jones- $360,000 & Smith - $260,000)

Calculation of capital account balances:

  Particulars Jones Smith

Cash $80,000 $40,000

Building- Fair Value $400,000   

Inventory- Fair value $280,000

Mortgage payable ($120,000)

Accounts payable ($60,000)

Capital Account Balance $360,000 $260,000