Question

A partnership has the following capital balances with partners' profit and loss percentages indicated parenthetically:

Henry (50%) $135,000
Thomas (30%) $85,000
Catherine (20%) $80,000


Anne is going to invest $125,000 into the business to acquire a 40 percent ownership interest. Goodwill is to be recorded. What will be Anne's beginning capital balance?

Answer 1

Anne's beginning capital balance will be $120,000.

Step-by-step explanation:

Anne is going to invest $125,000 into the business to acquire a 40 percent ownership interest. Goodwill is to be recorded. To determine Anne's beginning capital balance, we need to calculate her share of the total capital. First, we sum up the current capital balances of all partners: $135,000 + $85,000 + $80,000 = $300,000. Then, we calculate Anne's share of the total capital by multiplying her ownership interest (40%) by the total capital: $300,000 * 40% = $120,000. Therefore, Anne's beginning capital balance will be $120,000.