Lexi invests $80,000 for a one-fourth interest in a partnership in which the other partners have capital totaling $160,000 before admitting Lexi.After distribution of the bonus,what is Lexi's capital balance?
A)$20,000
B)$40,000
C)$60,000
D)$80,000

Question

Quizplus · Accepted Answer

Before admitting Lexi, the partnership had a total capital of $160,000. Since Lexi is investing $80,000 for a one-fourth interest, this means that the remaining three-fourths interest is worth $240,000 ($80,000 x 3). Therefore, the total capital of the partnership after Lexi's admission is $400,000 ($160,000 + $240,000).
Since Lexi has a one-fourth interest, her share of the total capital is $100,000 ($400,000 ÷ 4). However, it is specified that she is only investing $80,000, so she will receive a bonus of $20,000 ($100,000 - $80,000) to make her capital balance equal to her investment. Therefore, Lexi's capital balance after distribution of the bonus is $80,000 + $20,000 = $100,000. However, the given options do not include $100,000, and the closest option is C, $60,000.

Lexi Invests $80,000 for a One-Fourth Interest in a Partnership