Question

Following are the capital account balances for the William Jennings, and Bryan partnership: William (408 of gains and Losses) Jennings (403) Bryan (208) $ 290,000 240,000 220,000 Darrow invests $330,000 in cash for a 30 percent ownership interest. The money goes to the business. No goodwill or other revaluation is to be recorded. After the transaction, what is Jennings's capital balance? Multiple Choice O $240,000 O $242,400 O $241,800 0 $339,000

Answer 1

Answer. $242,400 Workings: Total capital: William (40% of gains and losses) Jennings (40%) Bryan (20%) Darrow (30%) $290,000 $240,000 $220,000 $330.000 $1,080,000 $324,000 Darrow is alloted 30% of total capital ($1,080,000 * 30%) Darrow Invests Difference (S330,000 - $324,000) $330.000 $6,000 The Difference amount $6,000 is assumed to be a bonus to the original partner Hence Jenning will be assigned 40% of difference amount i.e: $2.400. ($6,000 * 40%) $242.400 So Jenning capital balance (S240,000+ $2,400)