Answered: es in the ratio of 50:30:20, have…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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May, Two, and Low, are sharing profits and losses in the ratio of 50:30:20, have capital credit balances of $400,000; $300,000 and $200,000, respectively. They decided to admit Nose as a new partner for a 30% interest in the partnership upon Nose’s investment of an amount equal to five-sixths of his capital credit with no asset adjustment to be recognized. Immediately after the admission of Nose, what amount will be the capital credit balance of Two?

A. 300,000 B. 282,000 C. 270,000 D. 250,000

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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