The capital account balances for Donald & Hanes LLP on January 1, 2021, were as follows: Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized.What is the balance of May's capital account after the new partnership is created?

Question

The capital account balances for Donald & Hanes LLP on January 1, 2021, were as follows:  Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized.What is the balance of May's capital account after the new partnership is created?

Quizplus · Accepted Answer

First, we need to calculate the total capital balance of the partnership before May joins:

Donald's capital balance = $180,000
Hanes's capital balance = $120,000
Total capital balance = $180,000 + $120,000 = $300,000

Next, we need to calculate May's capital balance after she joins:

May's investment = $100,000
May's share of partnership capital = 35% of $400,000 (total capital after May joins) = $140,000

Therefore, May's capital account balance after the new partnership is created is $140,000.

The Capital Account Balances for Donald & Hanes LLP on January