The following balance sheet information is for the partnership of Professor, Mary Ann, and Skipper: Figures shown parenthetically reflect agreed profit and loss sharing percentages.
If the assets are fairly valued on the above balance sheet and the partnership wishes to admit Mrs.Howell as a new 1/5 partner without recording goodwill or bonus, Mrs.Howell should invest cash or other assets of

Question

The following balance sheet information is for the partnership of Professor, Mary Ann, and Skipper:  Figures shown parenthetically reflect agreed profit and loss sharing percentages.
If the assets are fairly valued on the above balance sheet and the partnership wishes to admit Mrs.Howell as a new 1/5 partner without recording goodwill or bonus, Mrs.Howell should invest cash or other assets of

Quizplus · Accepted Answer

To admit Mrs. Howell as a new 1/5 partner, the new ownership percentages will be:
Professor - 40%
Mary Ann - 25%
Skipper - 20%
Mrs. Howell - 15%

The new total assets after Mrs. Howell's investment will be:
$1,650,000 + X (Mrs. Howell's investment)

The new total equity will be:
(0.4)*(1,650,000 + X) + (0.25)*(1,650,000 + X) + (0.2)*(1,650,000 + X) + (0.15)*X = 1,342,000 + (0.15)*X

We can set the new equity equal to the new total assets:
1,342,000 + (0.15)*X = 1,650,000 + X
0.85*X = 308,000
X = $362,353. Therefore, Mrs. Howell should invest at least $362,353 to become a new 1/5 partner. 
The nearest option is C: $300,000.

The Following Balance Sheet Information Is for the Partnership of Professor