Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership's capital balances are Caitlin, $120,000; Chris, $80,000; and Molly, $100,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $60,000. The balance in Caitlin's capital account immediately after Paul's admission is:

Question

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First, we need to calculate the total capital balance of the partnership before Paul's admission:

Caitlin: $120,000 (3 parts)
Chris: $80,000 (4 parts)
Molly: $100,000 (3 parts)
Total: $300,000 (10 parts)

To find the value of one part, we divide the total capital balance by the total number of parts: $300,000 / 10 = $30,000.

Next, we need to calculate Paul's equity in the partnership, which is 20% of the total capital balance: 20% x $300,000 = $60,000.

Paul's investment of $60,000 equals his equity, so his capital balance is $60,000.

To adjust the partnership's capital balances for Paul's admission, we need to multiply each partner's current capital balance by their share ratio.

Caitlin: $120,000 x 3/10 = $36,000
Chris: $80,000 x 4/10 = $32,000
Molly: $100,000 x 3/10 = $30,000
Paul: $60,000

To get Caitlin's capital balance immediately after Paul's admission, we need to subtract her old capital balance from her adjusted capital balance: $36,000 - $3,600 (her share of Paul's equity) = $32,400. However, the problem asks for Caitlin's capital balance before subtracting her share of Paul's equity, so we add it back in: $32,400 + $3,600 = $36,000. Finally, we subtract Paul's equity from Caitlin's new capital balance: $36,000 - $3,600 = $32,400.

Therefore, the answer is B) $116,400.

Caitlin, Chris, and Molly Are Partners and Share Income and Losses