Question
Pat, Helma, and Diane are partners with capital balances of $50,000, $30,000, and $20,000, respectively. The partners share profits and losses equally. For an investment
Pat, Helma, and Diane are partners with capital balances of $50,000, $30,000, and $20,000, respectively. The partners share profits and losses equally. For an investment of $50,000 cash, MaryAnn is to be admitted as a partner with a one-fourth interest in capital and profits. Based on this information, the amount of MaryAnn's investment can best be justified by which of the following?
A.MaryAnn is apparently bringing goodwill into the partnership and her capital account will be credited for the appropriate amount. B.Assets of the partnership were overvalued immediately prior to MaryAnn's investment. C.The book value of the partnership's net assets was less than their fair value immediately prior to MaryAnn's investment. D.MaryAnn will receive a bonus from the other partners upon her admission to the partnership.
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