Able, Baker, and Charlie share profits and losses in a ratio of 2:3:5,

respectively.





Assets

Cash $ 100,000

Inventory 125,000

Marketable securities 200,000

Land 100,000

Building-net 500,000

Total assets $ 1,025,000



Equities

Able, capital $ 425,000

Baker, capital 400,000

Charlie, capital 200,000

Total equities $ 1,025,000



The partners agree to admit Delta for a one-fifth interest. The fair market value of partnership land is appraised at $200,000 and the fair market value of inventory is $175,000. The assets are to be revalued prior to the admission of Delta and there is $30,000 of goodwill that attaches to the old partnership.



1) By how much will the capital accounts of Able, Baker, and Charlie increase, respectively, due to the revaluation of the assets and the recognition of goodwill?


2) How much cash will Delta have to invest to acquire a one-fifth interest?



3) What will the profit and loss sharing ratios be after Delta’s investment?

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On June 30, 2011, the Able, Baker, and Charlie partnership had the following fiscal year-end balance sheet:

Cash $ 8,000