Joe and Susan have formed a partnership, Joe contributed accounts receivable with a gross value of $25,000 and a net realizable value of $20,000 as well as equipment with cost of $85,000, a net book value of $55,000 and a fair value of $75,000. How much will Joe's capital account be credited for?
Joe's capital account will be credited for the total value of his contributions to the partnership.
The accounts receivable contribution has a net realizable value of $20,000, so Joe's capital account will be credited for this amount.
The equipment contribution has a fair value of $75,000, so Joe's capital account will be credited for this amount.
Therefore, Joe's capital account will be credited for a total of $20,000 + $75,000 = $95,000.
To determine how much Joe's capital account will be credited for, we need to calculate the total value of his contributions.
1. Accounts Receivable:
Joe's accounts receivable has a gross value of $25,000 and a net realizable value of $20,000. The net realizable value is the amount expected to be collected from the accounts receivable. So, Joe is contributing $20,000 to the partnership.
2. Equipment:
Joe's equipment has a cost of $85,000, a net book value of $55,000, and a fair value of $75,000. The net book value represents the value of the equipment on the partnership's books, while the fair value represents the current market value. Joe's contribution to the partnership is based on the fair value of the equipment, which is $75,000.
Now, we can calculate Joe's total capital contribution:
Total Contribution = Accounts Receivable + Equipment Fair Value
Total Contribution = $20,000 + $75,000
Total Contribution = $95,000
Therefore, Joe's capital account will be credited for $95,000.
To determine how much Joe's capital account will be credited for, we need to calculate the total value of the assets he contributed to the partnership.
First, let's calculate the total value of the accounts receivable. Accounts receivable has a gross value of $25,000 and a net realizable value of $20,000. The net realizable value is the amount expected to be collected from the receivables, which is the relevant value for the partnership.
Total value of the accounts receivable = Net realizable value = $20,000
Next, let's calculate the total value of the equipment. The cost of the equipment is $85,000, but we need to consider the net book value and fair value.
The net book value is the value of the equipment after accounting for depreciation. The net book value is given as $55,000.
The fair value is the current market value of the equipment, which is given as $75,000.
To determine the total value, we can choose to use either the net book value or the fair value, depending on the partnership agreement or accounting standards. For this example, let's use the fair value.
Total value of the equipment = Fair value = $75,000
Now, let's calculate the total value of the assets contributed by Joe.
Total value of assets contributed = Total value of accounts receivable + Total value of equipment
= $20,000 + $75,000
= $95,000
Finally, Joe's capital account will be credited for the total value of the assets he contributed, which is $95,000.