Question

On May 1, Cobb and Mott formed a partnership and agreed to share profits and losses in the ratio of 3:7, respectively. Cobb contributed a parcel of land that cost him $10,000. Mott contributed $40,000 cash. The land was sold for $18,000 on that same date, immediately after formation of the partnership. What amount should be recorded in Cobb's capital account on formation of the partnership

Answer 1

Answer: $18000

Explanation:

We should note that the value of the contributed assets would be based on the fair values.

With regards to the question, we are already informed that the land was sold for $18,000 which in this case is the fair value of the asset.

Therefore, the amount that should be recorded in Cobb's capital account on formation of the partnership would be $18000.