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 questions 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.What are the capital balances of Allen and Daniel after David is admitted into the partnership?

Question

Quizplus · Accepted Answer

After David's admission, the new total capital of the partnership will be:

Allen's capital + Daniel's capital + David's capital = $140,000 + $40,000 + $44,000 = $224,000

Since David purchased a one-fifth interest, his capital will be one-fifth of the total capital:

David's capital = 1/5 × $224,000 = $44,800

Therefore, after David's admission, the capital balances of Allen and Daniel will be:

Allen's capital = $140,000 - $34,000 = $106,000
Daniel's capital = $40,000 - $10,000 = $30,000

Option C is therefore the correct answer.

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