In the AD partnership, Allen's capital is $140,000 and Daniel's is $40,000 and they share income in a 3:1 ratio, respectively. They decide to admit David to the partnership. Each of the following question is independent of the others.
Refer to the information provided above. David directly purchases a one-fifth interest by paying Allen $34,000 and Daniel $10,000. The land account is increased before David is admitted. By what amount is the land account increased?
A) $40,000
B) $10,000
C) $36,000
D) $20,000

Question

Quizplus · Accepted Answer

David pays a total of $44,000 for a one-fifth interest, which implies the total partnership value is $220,000. The original capital was $180,000 ($140,000 + $40,000), so the land account must be increased by $40,000 to make the total partnership value $220,000.

In the AD Partnership, Allen's Capital Is $140,000 and Daniel's