Question

In the JK partnership, Jacob's capital is $140,000, and Katy's is $40,000. They share income in a 3:2 ratio, respectively. They decide to admit Erin to the partnership. Each of the following questions is independent of the others.

Refer to the information provided above. What amount will Erin have to invest to give her a one-fourth interest in the capital of the partnership if no goodwill or bonus is recorded?
A. $45,000
B. $50,000
C. $60,000
D. $66,000

Answer 1

C. $60,000

Step-by-step explanation:

For computing the Erin investment, we have to assume the things which is shown below:

Let us assume Erin investment be X

We know that Erin would contributed 1 ÷ 4 investment in partners capital

So, the equation would be

1 ÷ 4 × ( $140,000 + $40,000 + X) = X

1 ÷ 4 × ($180,000 + X) = X

$45,000 + 1 ÷ 4X = X

So, $45,000 = 3 ÷ 4X

So, X = $45,000 × 4 ÷ 3

= $60,000