Question

The partnership of Gilligan, Skipper, and Ginger had total capital of $570,000 on December 31, 2017 as follows: Profit and loss sharing percentages are shown in parentheses. The partnership has no liabilities. If Mary Ann purchases a 25 percent interest from each of the old partners for a total payment of $270,000 directly to the old partners Gilligan, Capital (30%) Skipper, Capital (4590) Ginger, Capital (25%) Total $180,000 255,000 135,000 $570,000 e Minimized View A. total partnership net assets can logically be revalued to $1,080,000 on the basis the price paid by Mary Ann. B. the payment of Mary Ann does not constitute a basis for revaluation of partnersh net assets because the capital and income interests of the old partnership were not aligned. C. total capital of the new partnership should be $760,000. D. total capital of the new partnership will be $840,000 assuming no revaluation. dc

Answer 1

Answer:

Option A is Correct.

Partnership interest acquired is 25%

Amount invested by Mary Ann is $ 270,000

Total capital of the firm

= (270000/25%)

= $ 10,80,000

In this case, old partners shall a right to a bonus, which was mainly the benefit of increasing valuation of Net Assets.