The capital account balances for Donald & Hanes LLP on January 1, 2013, were as follows: $$\begin{array} { | l | r | }
\hline \text { Donald, capital } & \$ 200,000 \
\hline \text { Hanes, capital } & 100,000 \
\hline
\end{array}$$ 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, 2013, were as follows: $$\begin{array} { | l | r | } 
\hline \text { Donald, capital } & \$ 200,000 \
\hline \text { Hanes, capital } & 100,000 \
\hline
\end{array}$$ 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

May's capital account balance is calculated based on the total capital after her investment. The total initial capital is $300,000 ($200,000 + $100,000). May invests $100,000, making the total capital $400,000. May's 35% interest in the partnership means her capital account should be 35% of $400,000, which is $140,000.

The Capital Account Balances for Donald & Hanes LLP on January