Question

Abbott and Brown form a partnership. Abbott contributes $10,000.00 cash and $40,000.00 in merchandise inventory. Brown contributes $5000.00 in cash and land with a current market value of $30,000. (cost of $15,000). which of the following is correct?

Answer 1

Abbott contributes $50,000 and Brown contributes $35,000 to the partnership, resulting in a total investment of $85,000.

Step-by-step explanation:

The question presented deals with the concept of partnership contributions and the valuation of assets brought into a business by its partners. In establishing the value of contributions for Abbott and Brown's partnership, Abbott contributes a total of $50,000 - comprising $10,000 in cash and $40,000 in merchandise inventory. Brown, on the other hand, contributes $35,000 - which includes $5,000 in cash and land valued at $30,000 (even though the cost was $15,000, the current market value of the land is considered).

In this case, Abbott contributes $10,000.00 in cash and $40,000.00 in merchandise inventory, while Brown contributes $5,000.00 in cash and land with a current market value of $30,000.00. Therefore, the total investment made by Abbott is $50,000.00 ($10,000.00 cash + $40,000.00 merchandise inventory) and the total investment made by Brown is $35,000.00 ($5,000.00 cash + $30,000.00 land value). The correct option is that the total investment made by both partners is $85,000.00.