Peters and Chong are partners and share equally in income or loss.Peters' current capital balance is $140,000 and Chong's is $130,000.Peters and Chong agree to accept Aaron with a 30% interest in the partnership.Aaron invests $98,000 in the partnership.The amount credited to Aaron's capital account is:
A)$81,000.
B)$102,600.
C)$110,400.
D)$98,000.
E)$114,533.

Question

Quizplus · Accepted Answer

After Aaron's investment, the total capital in the partnership will be $140,000 + $130,000 + $98,000 = $368,000. 
To calculate the amount credited to Aaron's capital account, we need to first determine what percentage of the partnership he now owns. 
Peters and Chong previously shared the partnership equally, so they each had a 50% interest. After Aaron invests, they will each have a 35% interest (since they will each own 50% out of a total of $368,000 + $98,000 = $466,000). Aaron will own the remaining 30%. 
The amount credited to Aaron's capital account is therefore 30% of $466,000, which is $139,800. However, he invested $98,000, so we need to subtract this amount to find the net increase in his capital account: 
$139,800 - $98,000 = $41,800. 
Therefore, the amount credited to Aaron's capital account is $110,400 (choice C).

Peters and Chong Are Partners and Share Equally in Income