Question

Select the best answer for each of the following items. Questions 1 and 2 are based on the following condensed balance sheet for the partnership of Caine, Davis, and Jones. Cash Other Assets Caine, Receivable $90,000 820,000 40,000 Accounts Payable Jones, Loan Caine, Capital Davis, Capital Jones, Capital Total $220,000 40,000 300,000 200,000 190,000 $950,000 Total $950,000 The partners share income and loss in the ratio of 5:3:2, respectively. Assume that the assets and liabilities are fairly valued in the balance sheet and the partnership decides to admit Kuman as a new partner with a one-fourth capital Interest. No goodwill or bonus is to be recorded. How much should Kuman Invest in cash or other assets? O $233,333 O $230,000. O $172,500. O $175,000.

Answer 1

Correct Answer is $230000

Working:-

Current Total capital of the firm = 300000+200000+190000

Current Total Capital = 690000

Now,

Firm wants to admit Kuman for 1/4th of the capital Interest.

Therefore, Capital that need to be contributed by Kuman will be,

= Capital after admission - Capital of other partners

= 690000/3*4 - 690000

= 920000-690000

= 230000