Melanie Sherby and Nancy Libby operate a partnership. Sherbys capital account balance is $47,000 and Libbys is $36,000. Sherby and Libby have decided to admit a new partner to their business- Jim Fittro.

Fittro will contribute $20,000 cash to receive a one-third interest in the partnership. Prior to admitting Fittro, Sherby and Libby hired a certified public accountant to determine the current market values of the partnership assets. The CPA determined that the building owned by the partnership has a market value $15,000 greater than the book value shown on the financial statements. In addition the partnerships inventory is undervalued by $2,000 in the accounting records.

According to existing partnership agreement, Sherby and Libby share any income/lose equally.

A. Revalue the partnership assets.

B. Determine the total equity of the partnership after the new partner is admitted.

C. Determine the new partners share of the total equity.

D. Compare the new partners equity to his contribution.