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 $160,000.
-The balance in Paul's capital account immediately after his admission is:

Question

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 $160,000. 
-The balance in Paul's capital account immediately after his admission is:

Quizplus · Accepted Answer

First, we need to calculate the total capital balance before Paul's admission:
Caitlin = $120,000
Chris = $80,000
Molly = $100,000
Total = $300,000

Next, we need to calculate the amount of income and losses that will be shared by each partner after Paul's admission:
Caitlin = 3/(3+4+3+0.2) = 25%
Chris = 4/(3+4+3+0.2) = 33.33%
Molly = 3/(3+4+3+0.2) = 25%
Paul = 0.2/(3+4+3+0.2) = 1.67%

So, Paul's equity percentage is 20% of the new partnership total, which is $300,000 + $160,000 = $460,000.
Therefore, the balance in Paul's capital account immediately after his admission is:
$460,000 x 0.2 = $92,000.

Thus, Choice E is the correct answer.

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