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

question 63

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, 2013, 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.

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Definitions:

Debt Investments

Financial assets purchased with the expectation that the original funds will be returned over time with interest, typically including bonds or loans.

Government

The organized system through which a community or nation is ruled, involved in creating and enforcing laws.

Corporation Bonds

Long-term debt securities issued by corporations to finance their operations, acquisitions, or other significant projects.

Trading Security

A financial instrument that is bought and sold for short-term profit within the same accounting period.