Tom and Joan formed a partnership.
In addition to investing £15,000, Tom transferred ownership of a building, which had cost him £45,000, to the partnership. At the time of the transfer, the market value of the building was £60,000. The mortgage of £35,000 on the building was taken over by the partnership.
The amount to be recorded in Tom’s capital account is?
Select ONE answer:
- £25,000
- £40,000
- £60,000
- £75,000
Show your workings to arrive at your answer, and explain and justify your reasons:
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This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 2
- Not correct
- Correct – Capital = Cash (£15,000) + Value of the building to the partnership (£60,000 market value – £35,000 mortgage) thus £40,000
- Not correct
- Not correct
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