P, L, and O Are Partners with Capital Balances of $50,000

question 36

Multiple Choice

P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who share in the profit and loss of the PLO partnership 30%, 20%, and 50%, respectively, when they agree to admit C for a 20% interest.If C is to contribute an amount equal to his book value share of the new partnership, how much should C contribute?

• A) $22,000
• B) $20,000
• C) $25,000
• D) $18,000
• E) $10,000

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Definitions:

Expected Profitability

The forecasted return on investment for a business activity or project, considering potential profits and losses.

Interest-Rate Cost

The expense associated with borrowing money, reflected as a percentage of the total amount borrowed.

Optimal R&D

The most efficient level of investment in research and development activities that maximizes the benefit to a company or society.

Venture Capital

Funding given to startups and small businesses by investors who see potential for significant growth over time.