Chen and Wright Are Forming a Partnership

question 25

Multiple Choice

Chen and Wright are forming a partnership. Chen will invest a building that currently is being used by another business owned by Chen. The building has a market value of $90,000. Also, the partnership will assume responsibility for a $30,000 note secured by a mortgage on that building. Wright will invest $50,000 cash. For the partnership, the amounts to be recorded for the building and for Chen's Capital account are:

• A) Building, $90,000 and Chen, Capital, $90,000.
• B) Building, $60,000 and Chen, Capital, $60,000.
• C) Building, $60,000 and Chen, Capital, $50,000.
• D) Building, $90,000 and Chen, Capital, $60,000.
• E) Building, $60,000 and Chen, Capital, $90,000.

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Definitions:

Break-even

The point at which total costs and total revenues are equal, resulting in no net loss or gain.

Sales Dollars

The total revenue generated from the sale of goods or services, measured in dollar amount.

Common Fixed Expenses

Expenses that remain constant in total regardless of changes in the level of activity or volume of output.

Break-even

The point at which total cost and total revenue are equal, meaning there is no net loss or gain.