Sally Smythe enters into a partnership by contributing the following: Cash $15,000;Accounts Receivable $4,500;Machinery which cost $3,000 and has a fair market value of $2,125;and accounts payable of $1,200.What amount will be recorded in her capital account?
A)$21,625
B)$20,425
C)$22,500
D)$21,300

Question

Quizplus · Accepted Answer

The capital account will be credited with the sum of the cash, accounts receivable, and the fair market value of the machinery, minus the accounts payable. This calculation is $15,000 (cash) + $4,500 (accounts receivable) + $2,125 (machinery at fair market value) - $1,200 (accounts payable) = $20,425.

Sally Smythe Enters into a Partnership by Contributing the Following