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Partner A and Partner B have capital balances of $40,000 and $60,000, respectively, prior to the...

Partner A and Partner B have capital balances of $40,000 and $60,000, respectively, prior to the admission of Partner C. Partner C contributes $20,000 in exchange for a 20% interest in the partnership. The partnership agreement stipulates profits and losses are shared equally. What will be the balance in Partner A's capital account after the admission of Partner C?

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Answer #1
Total equity=Total of old partner's capital+Contribution by new partner=40000+60000+20000=$ 120000
Share of C in Equity=Total equity*20%=120000*20%=$ 24000
Bonus received (paid) by new partner=Cash paid by new partner-Share in equity=20000-24000=$ -4000
Bonus to be paid to old partners equally
A 4000/2 2000
B 4000/2 2000
Balance in partner A's capital account=Beginning balance+Bonus received=40000+2000=$ 42000
0 1

> $42,000 is not correct.

Julia Hargrove Wed, Jan 12, 2022 7:18 PM

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