Douglas pays Selena $45,000 for her 30% interest in a partnership with total net assets of $125,000. Following this transaction, Douglas' capital account should have a credit balance of

Question

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Selena's 30% interest in the partnership is worth $37,500 (30% x $125,000). Douglas paid her $45,000 for this interest, so he overpaid by $7,500. This means that Douglas' capital account should have a credit balance of $37,500 (the value of Selena's interest) minus $7,500 (the amount he overpaid), which equals $30,000.

Douglas Pays Selena $45,000 for Her 30% Interest in a Partnership