Question

Harvey and Quick have decided to form a partnership. Harvey is going to contribute a depreciable asset to the partnership as his equity contribution to the partnership. The following information regarding the asset to be contributed by Harvey is available:

Historical cost of the asset $76,000
Accumulated depreciation on the asset $40,000
Note payable secured by the asset $18,000
Agreed upon market value of the asset
will be assumed by the partnership $45,000
Based on this information. Harvey's beginning equity balance in the partnership will be:______.
a. $76,000.
b. $36,000.
c. $18,000.
d. $27,000.
e. $45,000.

Answer 1

d. $27,000.

Step-by-step explanation:

In the context, it is given that Harley and Quick wants to form a partnership. For this, Harley contributes his depreciable asset as an equity contribution in the partnership.

The amount of market value of the asset that would be assumed by this partnership is = $45,000

The amount of note payable that is secured by the asset or the debt assumed = $18,000

Therefore, the equity balance in the partnership = market value of asset - the debt assumed by the partnership

= 45,000 - 18, 000

= 27,000

Hence, the equity balance is $ 27,000 in the partnership.