Floyd and Merriam Start a Partnership Business on June 12,2019 $$\begin{array} { | l | r | } \hline \text { Floyd } & \$ 37,000 \\\hline \text { Merriam } & 22,000 \\\hline\end{array}$$

question 63

Multiple Choice

Floyd and Merriam start a partnership business on June 12,2019.Their capital account balances as of December 31,2020 stood as follows: $$\begin{array} { | l | r | } \hline \text { Floyd } & \$ 37,000 \\\hline \text { Merriam } & 22,000 \\\hline\end{array}$$ They agreed to admit Ramelow into the business for a one-third interest in the new partnership.Ramelow contributes $22,000 cash in exchange for the partnership interest.Assume that Floyd and Merriam shared profits and losses equally before the admission of Ramelow.Which of the following is the correct journal entry to record the above admission?

• A) \[\begin{array} { | l | r | r | }
• \hline \text { Cash } & 22,000 & \\
• \hline \text { Ramelow, Capital } & & 22,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | r | r | }
• \hline \text { Cash } & 22,000 & \\
• \hline \text { Merriam, Capital } & 2500 & \\
• \hline \text { Floyd, Capital } & 2500 & \\
• \hline \text { Ramelow, Capital } & & 27,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | r | r | }
• \hline \text { Merriam, Capital } & 13,500 & \\
• \hline \text { Floyd, Capital } & 13,500 & \\
• \hline \text { Ramelow, Capital } & & 27,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Cash } & 22,000 & \\
• \hline \text { Floyd, Capital } & & 2500 \\
• \hline \text { Merriam, Capital } & & 2500 \\
• \hline \text { Ramelow, Capital } & & 17,000 \\
• \hline
• \end{array}\]

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Definitions:

Credit Period

The duration of time allowed by a seller to the buyer to pay for the goods or services received, without incurring any additional costs.

Probability of Default

The likelihood that a borrower will fail to meet their debt obligations.

Consumer Credit

A type of personal loan that allows individuals to purchase goods or services with the promise to pay for them later.

Net Present Value

The discrepancy between cash inflows' present value and cash outflows' present value over a time frame, employed in capital budgeting for evaluating an investment's profitability.