Elkins and Landry are partners who share income and losses in the ratio of 3:2 respectively. On August 31 their capital balances were: Elkins $140000 and Landry $120000. On that date they agree to admit Neumark as a partner with a one-third capital interest. If Neumark invests $160000 in the partnership what is Landry's capital balance after Neumark's admittance?

Question

Quizplus · Accepted Answer

To find Landry's new capital balance, first, calculate the total capital after Neumark's investment. Neumark invests $160,000 for a one-third interest, valuing the partnership at $480,000 ($160,000 * 3). Before Neumark's investment, Elkins and Landry had a total capital of $260,000 ($140,000 + $120,000). The new total capital is $480,000. Since Neumark's $160,000 is for a one-third interest, the remaining $320,000 is split between Elkins and Landry in their original 3:2 ratio. Landry's share of the $320,000 is 2/5, which equals $128,000.

Elkins and Landry Are Partners Who Share Income and Losses