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 Paul's capital account immediately after his admission is:

Question

Quizplus · Accepted Answer

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

Caitlin: $120,000
Chris: $80,000
Molly: $100,000
Total: $300,000

Next, we need to determine the portions of income and loss that each partner will receive based on their ratio. We can do this by adding the ratio numbers together to get the denominator:

3 + 4 + 3 = 10

Caitlin's portion:
3/10 x Total = 3/10 x $300,000 = $90,000

Chris's portion:
4/10 x Total = 4/10 x $300,000 = $120,000

Molly's portion:
3/10 x Total = 3/10 x $300,000 = $90,000

Now we can determine Paul's initial capital balance. He is entering the partnership with a 20% equity, which means his portion of the total capital balance will be:

20% x $300,000 = $60,000

So Paul's initial capital balance is $60,000.

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