Question

"Forman and Berry are forming a partnership. Forman will invest a building that currently is being used by another business owned by Forman. The building has a market value of $80,000. Also, the partnership will assume responsibility for a $20,000 note secured by a mortgage on that building. Berry will invest $50,000 cash. For the partnership, the amounts to be recorded for the building and for Forman's Capital account are:

Answer 1

The amounts to be recorded for the building and for Forman's Capital account are $80,000 and $60,000 respectively

Step-by-step explanation:

According to the accounting principles, the fixed assets should be recorded at cost or market value whichever is lower

So, in the question, it is mentioned that the building has a market value of $80,000 so by $80,000 the building is recorded.

And, for the Forman's Capital account, the $60,000 should be recorded because we have to deduct the $20,000 building mortgage from the market value of the building so that the accurate value can be come.