In the AD partnership,Allen's capital is $140,000 and Daniel's is $40,000 and they share income in a 3:1 ratio,respectively.They decide to admit David to the partnership.Each of the following questions is independent of the others.
-Refer to the information provided above.Allen and Daniel agree that some of the inventory is obsolete.The inventory account is decreased before David is admitted.David invests $40,000 for a one-fifth interest.What is the amount of inventory written down?

Question

Quizplus · Accepted Answer

Since David's investment represents a one-fifth interest, the total value of the partnership must be $200,000 (5 * $40,000). If we assume that Allen and Daniel share the remaining $180,000 in a 3:1 ratio, then Allen's share is $135,000 and Daniel's share is $45,000. Thus, the total write-down must be $20,000 ($140,000 + $40,000 + $45,000 + $15,000 = $240,000, which is $40,000 more than the partnership value).

In the AD Partnership,Allen's Capital Is $140,000 and Daniel's Is