P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who share in the profit and loss of the PLO partnership 30%, 20%, and 50%, respectively, when they agree to admit C for a 20% interest.If C is to contribute an amount equal to his book value share of the new partnership, how much should C contribute?
A) $22,000
B) $20,000
C) $25,000
D) $18,000
E) $10,000

Question

Quizplus · Accepted Answer

The total capital of the partnership before C's admission is $100,000 ($50,000 + $30,000 + $20,000). C is to receive a 20% interest, so the total capital after C's admission should be $125,000 ($100,000 / 0.8). Therefore, C should contribute $25,000 ($125,000 - $100,000).

P, L, and O Are Partners with Capital Balances of $50,000