Allan and Ralph are partners.Allan has a capital balance of $92,000 and Ralph has a capital balance of $75,000.Carol invested $60,000 to acquire an ownership interest of $50,000.Which of the following is TRUE of the impact of the transaction on the balance sheet?

Question

Quizplus · Accepted Answer

When Carol invests $60,000, it will increase the assets (cash), as cash is an asset. But since she acquired an ownership interest of $50,000, the equity will also increase. Therefore, both assets and equity will increase. Allan's capital balance will remain unchanged, but Ralph's capital balance will increase to $85,000 ($75,000 + $10,000 share of Carol's investment).

Allan and Ralph Are Partners