The following are the capital account balances and profit and loss ratios of the partners in AB Partnership as of July 1, 20x1:

Capital accounts Profit or loss ratios

A, Capital 250,000 40%

B, Capital350,00060%

600,000

On July 1, 20x1, C was admitted to the partnership when he purchased a proportionate interest from A and B representing 20% interest in the net assets and profits of the firm for 100,000. The net assets of the firm as of this date approximate their fair values.

1.How much is the total equity of the partnership immediately after the admission of C?

a. 600,000b. 500,000c. 400,000d. none of these

2.How much is the adjusted capital balance of B after the admission of C?

a. 288,000b. 220,000c. 278,000d. none of these

3.How much is the gain or loss to be recognized in the partnership books?

a. 20,000b. (20,000)c. (30,000)d. 0

4.How much is the gain (loss) recognized by A from the sale of his interest to C?

a. (8,000)b. 8,000c. 12,000d. 0