The partners of Apple, Bere, and Carroll LLP share net income and losses in a 5:3:2 ratio, respectively. The capital account balances on January 1, 2013, were as follows: The carrying amounts of the assets and liabilities of the partnership are the same as their current fair values. Dorr will be admitted to the partnership with a 20% capital interest and a 20% share of net income and losses in exchange for a cash investment. The amount of cash that Dorr should invest in the partnership is:
A) $25,000.
B) $30,000.
C) $37,500.
D) $75,000.
E) $90,000.

Question

The partners of Apple, Bere, and Carroll LLP share net income and losses in a 5:3:2 ratio, respectively. The capital account balances on January 1, 2013, were as follows:  The carrying amounts of the assets and liabilities of the partnership are the same as their current fair values. Dorr will be admitted to the partnership with a 20% capital interest and a 20% share of net income and losses in exchange for a cash investment. The amount of cash that Dorr should invest in the partnership is:
A) $25,000. 
B) $30,000. 
C) $37,500. 
D) $75,000. 
E) $90,000.

Quizplus · Accepted Answer

($150,000/.8 = $187,500. $187,500 - $150,000 = $37,500 to invest)

The Partners of Apple, Bere, and Carroll LLP Share Net