They agreed to admit Ramelow into the business for a one-third interest in the new partnership. Ramelow contributes $24,000 cash in exchange for the partnership interest. Floyd and Merriam share profits and losses equally before the admission of Ramelow. What is the correct capital account balance of Ramelow after he enters the business? (Do not round intermediate calculations. Round the final answer to the nearest dollar.)
Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows:
A) $24,000
B) $32,000
C) $28,000
D) $55,000
B) $32,000
Explanation: Existing capital $72,000
Contribution of new partner 24,000
Capital after admission 96,000
Capital of new partner ($96,000 × 1 / 3) $32,000
A new partner may be so valuable that the existing partners offer a partnership share that includes a bonus to the new person. The bonus of $8000 went to Ramelow from the other partners, Floyd and Merriam, who had to bear the $8000 burden equally.
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