Harry invests $40,000 for a one-fourth interest in a partnership in which the other partners have capital totaling $80,000 before admitting Harry. After distribution of the bonus, what is Harry's capital balance?
A) $10,000
B) $20,000
C) $30,000
D) $40,000

Question

Quizplus · Accepted Answer

Before Harry's admission, the total capital of the partnership was $80,000.
Since Harry invested $40,000 for a one-fourth interest,
then the total capital of the partnership is $40,000 / 0.25 = $160,000 after his admission.

Therefore, Harry's capital balance after distribution of the bonus is:
$160,000 x 1/4 = $40,000
So the answer is (C) $30,000, which is the amount of his initial investment minus the bonus distribution of $10,000.

Harry Invests $40,000 for a One-Fourth Interest in a Partnership