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

question 42

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.C contributes $38,000 to the partnership and the bonus method is used. What amount will be credited for C's beginning capital balance?

• A) $20,000
• B) $25,000
• C) $27,600
• D) $32,600
• E) $38,000

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Definitions:

Marketable

Refers to assets or securities that are easily bought or sold in the market because of their high demand, liquidity, or both.

Bid Price

The highest price a buyer is willing to pay for a security or asset.

Treasury Bill

A short-term government security issued at a discount from the face value and matures at par, providing a return to the holder at maturity.

Dealer

An individual or firm in the securities business who buys and sells securities for their own account, rather than for customers, thus acting as a principal in the transactions.