Chapter 12, Problem 1MCQ

To determine

Identify the amount would be recorded for the building and Partner S’ capital account.

Answer to Problem 1MCQ

e. Building, $250,000; Stokely Capital, $200,000.

Explanation of Solution

Assets:

These are the resources owned and controlled by business and used to produce benefits for the company. Assets are classified on the balance sheet as current assets, non-current assets, property, plant, and equipment, and intangible assets.

Capital:

The term capital refers to any financial resources owned by the business to be used for its growth and expansion in the near future. A company’s capital includes investments, stocks, and other assets that are able to generate revenue in the near future.

Option (e): Building, $250,000; Stokely Capital, $200,000 is the correct answer.

• The amount invested by Partner S in the building is $250,000.
• Calculate the amount of S’ capital:

  $\begin{array}{c}\text{S's Capital account}=\left(\text{Market value of the building}-\text{Liabilities}\right)\\ =\left(\$250,000-\$50,000\right)\\ =\$200,000\end{array}$

Thus, the amount of building is $250,000 and S’s capital is $200,000.

As per the above explanation, option (a), (b), (c) and (d) are incorrect answer. Hence, option (e) is the correct answer.

Conclusion

Therefore, option (e) Building, $250,000; Stokely Capital, $200,000 is the correct answer.