Use the following information to answer the question(s) below.

A summary balance sheet for the Lemon, Mango, and Nobb partnership appears below. Lemon, Mango, and Nobb share profits and losses in a ratio of 2:3:5, respectively.
The partners agree to admit Oran for a one-fifth interest. The fair market value of partnership land is appraised at $200,000 and the fair market value of inventory is $175,000. The assets are to be revalued prior to the admission of Oran and there is $30,000 of goodwill that attaches to the old partnership.

-How much cash must Oran invest to acquire a one-fifth interest?
A)$235,000
B)$141,000
C)$293,750
D)$301,250

Question

Use the following information to answer the question(s) below.

A summary balance sheet for the Lemon, Mango, and Nobb partnership appears below. Lemon, Mango, and Nobb share profits and losses in a ratio of 2:3:5, respectively.
The partners agree to admit Oran for a one-fifth interest. The fair market value of partnership land is appraised at $200,000 and the fair market value of inventory is $175,000. The assets are to be revalued prior to the admission of Oran and there is $30,000 of goodwill that attaches to the old partnership.

-How much cash must Oran invest to acquire a one-fifth interest?
A)$235,000 
B)$141,000 
C)$293,750 
D)$301,250

Quizplus · Accepted Answer

If Oran invests $1,506,250, he will acquire a 100% interest in the company.

To acquire a one-fifth interest, Oran needs to invest 1/5 of $1,506,250:

(1/5) x $1,506,250 = $301,250

Therefore, Oran must invest $301,250 to acquire a one-fifth interest in the company. The correct answer is D.

Use the Following Information to Answer the Question(s) Below