Following is the condensed balance sheet of Martinez, O'Neilland Clemens, partners who share profits or losses in the ratio of 2: 3 : 5.
| Cash | $50,000 | Liabilities | $200,000 |
| Other assets | 1,050,000 | Capital - Martinez | 100,000 |
| | Capital - O'Neill | 300,000 |
| | Capital - Clemens | 500,000 |
| Total assets | $1,100,000 | Total liabilities and capital | $1,100,000 |
Required
(a) Assume that the partnership’s assets and liabilities arefairly valued as shown. The partners wish to admit Jeter as apartner with a 40 percent interest in capital, profits, and losses.They require Jeter to invest an amount such that bonus or goodwilladjustments are not needed. How much should Jeter invest for the 40percent share?
$Answer
(b) Assume instead that the existing partners, all of whomcontemplate retirement relatively soon, decide to sell Jeter 40percent of their respective partnership interests for a totalpayment of $480,000. This payment will be made proportionately toMartinez, O’Neill, and Clemens. The partners agree that impliedgoodwill is to be recorded prior to the transaction with Jeter.What are the capital balances of the four partners after thetransaction with Jeter?
Balances After
AcquisitionMartinez$Answer
O'NeillAnswer
ClemensAnswer
JeterAnswer
Total$Answer
