The following information is available on PDC Enterprises, a partnership, for the most recent fiscal year: There are three partners in TGR Enterprises: Pearson, Darling and Cathay. At the end of the year, based on their proportionate investments and withdrawals, the partners' capital accounts were in the ratio of 2:2:1, respectively. Compute the ending capital balances of Cathay.
A)$466,000.
B)$402,000.
C)$416,000.
D)$544,000.
E)$388,000.

Question

The following information is available on PDC Enterprises, a partnership, for the most recent fiscal year:  There are three partners in TGR Enterprises: Pearson, Darling and Cathay. At the end of the year, based on their proportionate investments and withdrawals, the partners' capital accounts were in the ratio of 2:2:1, respectively. Compute the ending capital balances of Cathay.
A)$466,000. 
B)$402,000. 
C)$416,000. 
D)$544,000. 
E)$388,000.

Quizplus · Accepted Answer

Let X be the total ending capital of the partnership. 
Then Pearson and Darling's ending capital is 2X/5 and 2X/5, respectively.
Since the ending capital of Cathay is in the ratio of 2:2:1, Cathay's ending capital is X/5.
The sum of the partners' capital accounts equals the total ending capital: 
2X/5 + 2X/5 + X/5 = X 
Solving for X, we get X = $1,920,000. 
Therefore, Cathay's ending capital is X/5 = $416,000. 
So the answer is C) $416,000.

The Following Information Is Available on PDC Enterprises, a Partnership