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The capital account balances for Dina & Hanan partnership on January 1, 2018, were as follows:...

The capital account balances for Dina & Hanan partnership on January 1, 2018, were as follows: Dina Capital $200,000 Hanan Capital $100,000 Dina and Hanan shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit Maya to the partnership with a 35% interest in partnership capital and net income. Maya invested $100,000 cash, and no goodwill was recognized. What is the balance of Dina's capital account after the new partnership is created?

A.   $140,000    B.   $200,000    C.   $176,000    D.   $160,000

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Answer #1

Existing partner capital = $200,000 + $100,000 = $300,000

New partner's investment = $100,000

Total capital = $400,000

Maya was admitted for 35% share in partnership

Therefore Maya's capital = 400,000 * 35% = $140,000

Maya invested $100,000 in return for capital allocation of $140,000

The difference is debited from old partners' capital account in their old ratio, which is 40,000 (140,000 - 100,000)

Dina - 40,000 * 3/5 = 24,000

Hanan - 40,000 * 2/5 = 16,000

Balance of Dina's capital account after the new partnership is created is 200,000 - 24,000 = $176,000.

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