Canfield Invests Cash of $20,000 and Inventory with a Cost

question 151

Multiple Choice

Canfield invests cash of $20,000 and inventory with a cost of $60,000 and a current value of $65,000 in the Canfield and Roose Partnership.In addition,Canfield invests land with a cost of $75,000,a current market value of $170,000,and a $70,000 mortgage on the property assumed by the partnership.Roose invests equipment with a cost of $100,000 and accumulated amortization of $40,000.Roose's equipment has a current market value of $100,000.Roose also invests inventory with a current market value of $30,000.
-How much cash must be invested by Roose so that the two partners have equal balances in their capital accounts?

• A) $25,000
• B) $55,000
• C) $15,000
• D) $35,000

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Definitions:

Profit Maximization

The approach a business takes to determine the pricing and output that lead to the utmost profit.

Production Function

Describes the technological relationship between the quantity of inputs used and the quantity of output produced.

Production Function

An equation that describes the maximum amount of output that can be produced with a given set of inputs.

Profit Maximization

A strategy employed by businesses to find the price and production levels that maximize profits.