Question

Karen is investing in a partnership with Maria. Karen contributes equipment that originally cost $21200, has...

Karen is investing in a partnership with Maria. Karen contributes equipment that originally cost $21200, has a carrying amount of $13300, and a fair value of $17700. The entry that the partnership makes to record Karen's initial contribution includes a

credit to Accumulated Depreciation for $7900.

debit to Equipment for $13300.

debit to Equipment for $21200.

debit to Equipment for $17700.
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Answer #1

Answer: Debit to Equipment for $17,700

If a partner contributes an asset other than cash to the the partnership. then the asset contributed will be recorded at the fair market value of the asset.That is, an asset account will be debited and partner's capital account will be credited for the fair market value of the asset.

In the given situation, fair market value of equipment contributed by karen is $17,700. Therefore, the equipment contributed will be recorded by debiting Equipment account and crediting Karen's capital account for $17,700.

The Journal entry to record the contribution will be :

Equipment 17,700

Karen's capital 17,700

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