Sole proprietors X and Y decide to form a partnership. X contributes inventory with a fair value of $30 000, equipment with a fair value of $100 000 and it is agreed that the partnership will take over X's bank loan of $20 000. What is X's capital balance assuming that the partners have agreed that his capital balance will be equal to the fair value of the net assets he contributes?
A) $110 000
B) $130 000
C) $150 000
D) $20 000

Question

Quizplus · Accepted Answer

X's capital balance is calculated by taking the fair value of the assets he contributes ($30,000 + $100,000 = $130,000) and subtracting the bank loan that the partnership takes over ($20,000), resulting in a capital balance of $110,000.

Sole Proprietors X and Y Decide to Form a Partnership