Question

Kirk invests $60,000 for a one-third interest in a partnership in which two other partners, Steve and Paul had capitals totaling $60,000 before admitting Kirk. What amount will be credited to Kirk's capital account ?

a. $30,000
b. $60,000
c. $40,000
d. $90,000

Answer 1

Kirk will be credited $60,000 to his capital account upon investing in the partnership, matching his investment to secure a one-third interest.

Step-by-step explanation:

The question involves calculating the amount to be credited to Kirk's capital account upon his investment in a partnership. If Kirk invests $60,000 for a one-third interest, and the existing partners, Steve and Paul, had capitals totaling $60,000 before admitting Kirk, it effectively means their combined capital was doubled with Kirk's investment. Hence, Kirk will be credited the same amount as he invested to obtain that one-third interest in the partnership.

Therefore, the correct amount to be credited to Kirk's capital account is $60,000 (Option b). This figure ensures that the total capital in the partnership is now $120,000, and Kirk's one-third interest represents his $60,000 contribution.