Jane and Castle are partners and share equally in income or loss. Jane's current capital balance is $140,000 and Castle's is $130,000. Jane and Castle agree to accept Sean with a 30% interest in the partnership. Sean invests $108,000 in the partnership. The balances in Jane's and Castle's capital accounts after admission of the new partner equal:
A) Jane $140,000; Castle $130,000.
B) Jane $142,700; Castle $132,700.
C) Jane $145,000; Castle $135,000.
D) Jane $137,300; Castle $127,300.
E) Jane $135,000; Castle $124,000.

Question

Quizplus · Accepted Answer

Sean's investment of $108,000 for a 30% interest implies the total partnership value is $360,000. The existing partners' combined capital is $270,000, so they must give up $18,000 of their capital to Sean. This $18,000 is split equally between Jane and Castle, reducing their balances by $9,000 each. Thus, Jane's new balance is $140,000 - $9,000 = $131,000, and Castle's is $130,000 - $9,000 = $121,000. However, the correct answer should reflect the new balances after the adjustment, which is Jane $137,300 and Castle $127,300.

Jane and Castle Are Partners and Share Equally in Income