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Answer :
Final answer:
Fontaine's capital account would be recorded at $334,000, matching the building's market value, while Monroe's capital account would include both her cash and equipment investments, totaling $159,000. However, since the partnership assumes Fontaine's building mortgage of $117,000, Fontaine's actual equity contribution is $217,000.
Explanation:
The question revolves around calculating the partnership equity contributions of Fontaine and Monroe when forming a partnership. Fontaine contributes a building valued at $334,000 but the partnership takes on a mortgage note of $117,000. Therefore, the amount recorded for the building in the partnership's books will still be $334,000, and this should also be the value recorded for Fontaine's capital account. However, because the partnership is assuming the mortgage, Fontaine's actual equity contribution is the market value of the building ($334,000) minus the mortgage ($117,000), which equals $217,000.
Monroe invests $92,000 in cash plus equipment with a market value of $67,000. Therefore, Monroe's capital account will be recorded as the sum of these two amounts, which is $159,000.
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Answer:
Building= $334,000
Fontaine's capital account= $217,000
Explanation:
From the question above
Fountain company and Monroe company come together to form a partnership.
Fontaine invests a building that has a market value of $334,000
The partnership takes charge for a $117,000 note secured by a mortgage on the building
Monroe invests $92,000 on cash and equipments
The cash and equipments has a market value of $67,000
Therefore the amount recorded for the building is $334,000
The amount recorded for Fontaine's capital account is
= $334,000-$117,000
= $217,000
Hence for the partnership the amounts recorded for the building and fontaine's capital account is $334,000 and $217,000 respectively.
