Question

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 balances in Peters and Chong's capital accounts after admission of the new partner equal:

Answer 1

Answer: Peters capital = $133,800

Chong's capital = $123,800

Explanation:

Given that,

Peters' current capital balance = $140,000

Chong's = $130,000

Aaron with a 30% interest in the partnership

Aaron invests = $98,000 in the partnership

Aaron's share in Equity = 30% of (140000+130000+98000)

                                      = 30% × $368,000

                                      = $110,400

Therefore,

Peters capital = $140,000-\frac{(110,400-98,000)}{2}$

                       = $133,800

Chong's capital = $130,000-\frac{(110,400-98,000)}{2}$

                       = $123,800