As Part of the Initial Investment, Omar Contributes Accounts Receivable

question 119

Multiple Choice

As part of the initial investment, Omar contributes accounts receivable that had a balance of $22,500 in the accounts of a sole proprietorship. Of this amount, $2,000 is completely worthless. For the remaining accounts, the partnership will establish a provision for possible future uncollectible accounts of $1,500. The amount debited to Accounts Receivable for the new partnership is

• A) $19,000
• B) $22,500
• C) $21,000
• D) $20,500

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Definitions:

Initial Cost

The amount of money spent to acquire or start up an asset or investment, excluding any subsequent costs for maintenance or operation.

Accumulated Depreciation

The total depreciation for a fixed asset that has been charged to expense since the asset was acquired and made available for use.

Machinery

Heavy industrial equipment used in the production of goods or for performing services, which can include machines for manufacturing, assembly, and packaging.

Fixed Asset Turnover Ratio

The number of sales dollars earned per dollar of fixed assets, computed by dividing sales by the average book value of fixed assets.