Shaun and Rick Are Partners

question 6

Multiple Choice

Shaun and Rick are partners. Shaun has a capital balance of $10,000 and Rick has a capital balance of $8,000. Edwin invests a building with a current market value of $6,000 to acquire an interest in the new partnership. Which of the following is true of the effect of the transaction on the balance sheet? (Assume no bonus to any partner.)

• A)Both assets and equity will increase by $6,000.
• B)Both assets and liabilities will decrease by $6,000.
• C)Both assets and equity will decrease by $6,000.
• D)Both assets and liabilities will increase by $6,000.

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Definitions:

Pure Inductive

Refers to a circuit element or circuit that purely has inductance without any resistance, ideally opposing changes in current by generating a magnetic field.

Current

The rate of flow of electrons.

Coil

A component that produces a magnetic field when electric current flows through it.

Inductance

The property of an electrical conductor by which a change in current flowing through it induces an electromotive force in both that conductor and any nearby conductors.