A Local Partnership Has Two Partners, Jim and Pam

question 80

Multiple Choice

A local partnership has two partners, Jim and Pam. Jim has a capital balance of $150,000 and Pam has a capital balance of $125,000. These two partners share profits and losses 60 percent (Jim) and 40 percent (Pam) . Cece invests $75,000 in cash in the partnership for a 25 percent ownership. The bonus method will be used. What is Pam's capital balance after this new investment?

• A) $87,500.
• B) $157,500.
• C) $142,500.
• D) $120,000.
• E) $130,000.

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Definitions:

Stock Split

Issuing of additional shares of stock to stockholders; total par or stated value remains the same.

Par Value

The face value of a bond or stock, representing the amount to be returned to the bondholder at maturity or the value assigned to a share of stock for accounting purposes.

Stock Split

A corporate action to increase the number of shares, reducing the price per share correspondingly without changing the market capitalization.

Par Value

A nominal value given to a security or stock specified by the issuing company, which may not necessarily reflect its actual market value.