The Partners of Apple, Bere, and Carroll LLP Share Net

question 19

Multiple Choice

The partners of Apple, Bere, and Carroll LLP share net income and losses in a 5:3:2 ratio, respectively. The capital account balances on January 1, 2011, were as follows:

The carrying amounts of the assets and liabilities of the partnership are the same as their current fair values. Dorr will be admitted to the partnership with a 20% capital interest and a 20% share of net income and losses in exchange for a cash investment. The amount of cash that Dorr should invest in the partnership is:

• A) $25,000.
• B) $30,000.
• C) $37,500.
• D) $75,000.
• E) $90,000. ($150,000/.8=$187,500. $187,500 - $150,000 = $37,500 to invest)

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Definitions:

Considerations

Factors thought about or taken into account before making a decision or judgment.

Brick-and-mortar Stores

Physical retail outlets located in buildings as opposed to online or virtual shops.

Reciprocal Pricing

Reciprocal pricing is a pricing strategy where competitors agree, either formally or informally, to set prices at a certain level, often to stabilize market conditions or ensure mutual profitability.

Contract Manufacturers

Companies that produce goods under contract for other companies, under the branding of the latter, often as a cost-saving measure.