The capital account balances for Donald & Hanes LLP on January 1, 2011, were as follows: $$\begin{array} { | l | r | }
\hline \text { Donald, capital } & \$ 200,000 \
\hline \text { Hanes, capital } & 100,000 \
\hline
\end{array}$$ Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized.
-What is the balance of Hane's capital account after the new partnership is created?

Question

The capital account balances for Donald & Hanes LLP on January 1, 2011, were as follows: $$\begin{array} { | l | r | } 
\hline \text { Donald, capital } & \$ 200,000 \
\hline \text { Hanes, capital } & 100,000 \
\hline
\end{array}$$ Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized.
-What is the balance of Hane's capital account after the new partnership is created?

Quizplus · Accepted Answer

The correct answer is A.The balance of Hanes' capital account after the new partnership is created is $84,000. This is calculated as follows:Hanes' capital account balance before May's admission = $100,000May's investment = $100,000Total capital after May's admission = $200,000 + $100,000 = $300,000Hanes' capital account balance after May's admission = $300,000 x 35% = $105,000Less: Hanes' capital account balance before May's admission = $100,000Hanes' capital account balance after the new partnership is created = $105,000 - $100,000 = $84,000

The Capital Account Balances for Donald & Hanes LLP on January