Question

189. Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership’s capital balances are Caitlin, $137,000; Chris, $97,000; and Molly, $117,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $77,000. The balance in Caitlin’s capital account immediately after Paul’s admission is:

• $139,580

• $134,420

• $77,000

• $85,600

• $137,000

195. Martin Company purchases a machine at the beginning of the year at a cost of $69,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 5 years with a $6,000 salvage value. The book value of the machine at the end of year 5 is:

• $27,600.

• $12,600.

• $6,000.

• $63,000.

• $0.

Answer 1

	Correct answer is: $134420
	Working:
	Paul's share in partnership:
	Caitlin	=	$       1,37,000
	Chris	=	$           97,000
	Molly	=	$       1,17,000
	Paul	=	$           77,000
(i)	Total	=	$       4,28,000
(ii)	Share	=	20%
(i) X (ii)			$           85,600
	The balance in Catlins Capital after Paul's share admission	=	$137000 - [($85600 - $77000) X 30%]
		=	$       1,34,420
	Correct answer is: $6000
	Working:
	Cost	=	$           69,000
Less:	Salvage Value	=	$             6,000
	Net Value	=	$           63,000
	Useful life	=	5 years
	Depreciation per year	=	$           12,600
	Book value of at the end of 5th year	=	$69000 - ($12600 X 5 years)
		=	$             6,000