(a) State what amount of capital C has to bring in.
(b) Set out the capital accounts of each >partner in the new partnership.
(c) State in what proportions the profits will be divided in the future, A and B, as between themselves, sharing in the same proportion as before.
7. New, Knott, and Moore are partners, sharing profits in the proportion of their investments. On December 31, 1920, the balance sheet of the partnership is as follows:
| Assets | Liabilities and Capital | ||
| Cash | $18,000.00 | Accounts Payable | $ 1,000.00 |
| Other Current Assets | 23,000.00 | Moore, Capital | 24,000.00 |
| Fixed Assets | 20,000.00 | New, Capital | 24,000.00 |
| Knott, Capital | 12,000.00 | ||
| $61,000.00 | $61,000.00 | ||
Moore decides to retire from active business and agrees to sell his interest to the other two partners for $26,400, taking $14,400 in cash and the balance in three equal instalments payable July 2, 1921, January 2, 1922, and July 2, 1922, evidenced by notes payable.
The business is very prosperous, but it becomes increasingly evident that more capital is required, especially in view of the approaching maturity of the first note given to Moore. New and Knott decide to admit John Less as partner as of date July 1, 1921, at which time the current assets have increased by $16,000, accounts payable by $10,000, and the partners’ capital accounts by $6,000. They value the good-will at $12,000.
Less buys a one-third interest, but stipulates that all he pays must remain in the business and that the good-will shall not appear upon the books.
How much must he pay for the one-third interest? Present the balance sheet of the firm of New, Knott & Less as of July 1, 1921. (Ignore accrued interest on Moore notes.)
Partnership—Operation