Reference no: EM132755146

A and B formed a partnership. The following are their contributions:

                                            A                         B

Cash                           200,000              -

Accounts receivable       150,000                 -

Inventory                     100,000                 -

Land 500,000

Building 620,000

Total 450,000 1,120,000

Note payable 220,000

A, capital 230,000

B, capital 1,120,000

Total                              450,000                1,120,000

Additional information:

1. The accounts receivable has a recoverable amount of ?120,000.
2. The inventory has an estimated selling price of ?110,000 and estimated costs to sell of ?20,000.
3. The land has a fair value of ?500,000 an unpaid mortgage of ?120,000. The partners agreed that B shall settle the mortgage using his personal funds.
4. The building is over-depreciated by ?30,000.
5. The building also has an unpaid mortgage amounting to ?550,000. The partners agreed that the partnership shall assume repayment of the mortgage.
6. The note payable has a fair value of ?210,000.
7. A and B shall share in profits and losses 40% and 60%, respectively.

Problem 1: How much are the adjusted capital balances of A and B, respectively?