A partnership has the following capital balances with partners' profit and loss percentages indicated parenthetically: Henry (60%) Thomas (25%) Catherine (15%) $ 76,000 90,000 130,000 Anne is going to invest $75,000 into the business to acquire a 30 percent ownership interest

Accounting Dec 11, 2020

A partnership has the following capital balances with partners' profit and loss percentages indicated parenthetically:
Henry (60%) Thomas (25%) Catherine (15%)
$ 76,000 90,000 130,000
Anne is going to invest $75,000 into the business to acquire a 30 percent ownership interest. Goodwill is to be recorded. What will be Anne's beginning capital balance?
Multiple Choice
O $75,000
O $111,300
O $88,800
O $126,857

Expert Solution

Anne's investment = 30%

Original capital= 76000+ 90000+ 130000

= 296000

Anne's investment = 30% (Original Capital Plus Anne's Investment)

$75000+ Goodwill = 0.30 ($296000 + $75000 + Goodwill)

$75,000 + Goodwill = $111300 + 0.30 Goodwill

0.70 Goodwill = $36300

Goodwill =36300/ 0.70

= $51,857

Anne's Investment (Capital) = $75000 + $51,857

= 126,857

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