Question

Jell and dell were partners with capital balances of 600 and 800 and an income sharing ratio of 2:3. They admitted zell with a 30% interest in the partnershipand the total amount of goodwill credited to the original partners was 700. What amount did zell contribute to the business?

Answer 1

Answer: $900

Explanation:

The Total Capital of the company before Zell was admitted was;

= Capital balances + Goodwill

= 600 + 800 + 700

= $2,100

If they admitted Zell in with a 30% interest, this means that the $2,100 is equivalent to 70% of the company's capital.

If that is the case then Total capital is;

= 2,100/ 70%

= $3,000

Zell's contribution is;

= 30% * 3,000

= $900