Williams and Creech agree to admit Kelley to their partnership.Kelley will purchase one-half of Williams' interest directly from him for $110,000.The current balance in Williams' capital account is $200,000.Williams' capital account will be debited for $100,000.

Question

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Since Kelley is purchasing half of Williams' interest for $110,000, this means that Williams' interest is valued at $220,000 (double the purchase price). Since Williams' current capital account balance is $200,000, debiting his account for $100,000 (half of $200,000) will reduce his interest to $100,000, which is exactly half of the new total value of the partnership.

Williams and Creech Agree to Admit Kelley to Their Partnership