Question

Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership’s capital balances are Caitlin, $128,000; Chris, $88,000; and Molly, $108,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $68,000. The balance in Caitlin’s capital account immediately after Paul’s admission is:_______

Answer 1

Answer:

$94,080

Explanation:

Data provided in the question:

The partnership’s capital balances

Caitlin=  $128,000

Chris = $88,000

Molly = $108,000

Paul's equity = 20%

Amount invested by the Paul = $68,000

Now,

The total value of the capital = ∑ ( capital balances of each partner )

= $128,000 + $88,000 + $108,000 + $68,000

= $392,000

Therefore,

The balance in Paul's capital account immediately after Paul’s admission

= 20% of $392,000

= $78,400

Thus,

Balance in capital account for Caitlin, Chris, and Molly

= total value of the capital  - Balance in Paul's capital

= $392,000 - $78,400

= $313,600

also,

Share of Caitlin = $\frac{3}{3+4+3}$ = 0.3

hence,

balance in Caitlin’s capital account immediately after Paul’s admission

= 0.3 × $313,600

= $94,080