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. david invests $40,000 for a one-fifth interest in the total capital of $220,000. what are the capital balances of allen and daniel after david is admitted into the partnership?
allen daniel
a) 16 6
b) 136000 36000
c) 14 4
d) 137000 39000
a. option a
b. option b
c. option c
d. option d

D) 137000 39000

Explanation:

Allen  140,000

Daniel 40,000

Capital before admission 180,000

share ratio 3:1

Capital after admission:

180,000 + 40,000 = 220,000

David participation: 20%

220,000 x 20% = 44,000

David investment  40,000

goodwill: 4,000

There is a difference in goodwill which will be supported for the old partner as their current share ratio

Allen 4,000 x 3/4 = 3,000

Daniel 4,000 x 1/4 = 1,000

Capital after David admission:

140,000 - 3,000 = 137,000

40,000 - 1,000 = 39,000

d) social security number

let me know if i am correct or not, so i can edit the answer.

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