Question

E contributes $36,000 in cash to the business to receive a 10 percent interest in the partnership. Goodwill is to be recorded. Profits and losses have previously been split according to the following percentages: A, 30 percent; B, 10 percent; C, 40 percent; and D, 20 percent. After E makes this investment, what are the individual capital balances

Answer 1

Answer:

A = $97,200

B = $32,400

C = $129,600

D = $64,800

E = $36,000

Explanation:

Provided for 10% share in business E contributes = $36,000

That means total capital = $36,000/10% = $360,000

Therefore remaining partner's share = 100 - 10% = 90%

Total Value of share of all partners  except E = $360,000 - $36,000 = $324,000

Which shall be in the ratio

A = 30%, B = 10%, C = 40%, D = 20%

Therefore, capital balances shall be as follows:

A = $324,000 $\times$ 30% = $97,200

B = $324,000 $\times$ 10% = $32,400

C = $324,000 $\times$ 40% = $129,600

D = $324,000 $\times$ 20% = $64,800

E = $36,000

Total Share = $360,000