On January 1, 2016, Jeffrey Madaras contributes land in a partnership with Dave Adams. Madaras purchased the land in 2011 for $300,000. A real estate appraiser now values the land at $625,000. Madaras wants $625,000 capital in the new partnership, but Adams objects. Adams believes that Madaras’s capital contribution should be measured by the book value of his land. Adams and Madaras seek your advice.
1. Which value of the land is appropriate for measuring Madaras’s capital-book value or current market value?
2. Give the partnership’s journal entry to record Madaras’s contribution in the business.