James wants to invest cash so that he will have a one-third interest in Thomas and Stanley's company.The capital balances are $6,000 Thomas,$9,000 Stanley.The admission of James would be to:
A)debit Cash $3,000;credit James,Capital $3,000.
B)debit Cash $4,500;credit James,Capital $4,500.
C)debit Cash $7,500;credit James,Capital $7,500.
D)debit Cash $12,000;credit James,Capital $12,000

Question

Quizplus · Accepted Answer

In order for James to have a one-third interest in the company, the total capital balance must be divided into three equal parts. The total capital balance is $15,000 ($6,000 + $9,000). One-third of $15,000 is $5,000. Since James already has $0 in capital, he would need to invest $7,500 ($5,000 - $2,500, which is the difference between his current capital balance and his desired capital balance) to have a one-third interest. Therefore, the entry would be to debit Cash $7,500 and credit James, Capital $7,500.

James Wants to Invest Cash So That He Will Have