On November 30 capital balances are Ross $300000 Ellis $250000 and Gise $250000. The income ratios are 20% 20% and 60% respectively. Ross decides to retire from the partnership. The partnership pays Ross $250000 cash for her partnership interest. After Ross's retirement what is the balance of Gise's capital account?

Question

Quizplus · Accepted Answer

Before Ross's retirement, the total capital balance is $800,000 ($300,000 + $250,000 + $250,000). After paying Ross $250,000 and removing her from the partnership, the remaining capital balance is $550,000 ($300,000 + $250,000). 
Gise's share of the remaining capital balance is 60%, so her capital balance is 0.6 x $550,000 = $330,000. However, this is not the final answer because the question asks for Gise's capital account balance after Ross's retirement. 
To get the final answer, we need to subtract the amount paid to Ross from Gise's share of the remaining capital balance: 
$330,000 - ($250,000 x 0.6) = $180,000 
Therefore, Gise's capital account balance after Ross's retirement is $180,000. However, we need to remember that Gise's initial capital balance was $250,000, so we need to add this back to the calculated amount: 
$180,000 + $250,000 = $430,000. 
Therefore, the correct answer is D.

On November 30 Capital Balances Are Ross $300000 Ellis $250000