If C is to contribute an amount equal to his book value share of the new partnership, how much should C contribute?
A) $22,000
B) $20,000
C) $25,000
D) $18,000
E) $10,000

Question

Quizplus · Accepted Answer

The book value of C's share can be found by dividing C's original capital contribution by the old partnership ratio:

C's share = $80,000 / (0.3 + 0.2 + 0.1) = $80,000 / 0.6 = $133,333.33

C's book value share of the new partnership is 25%, which is equal to:

$133,333.33 x 0.25 = $33,333.33

Therefore, C should contribute $33,333.33 to the new partnership, which is closest to answer choice C, $25,000.

If C Is to Contribute an Amount Equal to His