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Calculate olivias initial capital balance

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Question - Liam, Michael and Noah own interests in the LMN Partnership. Their current capital account balances are as follows:

Liam $250,000

Michael 300,000

Noah 200,000

Partnership income is shared in a 3:5:2 ratio. Olivia buys a 20% interest in the partnership by acquiring 20% of each existing partner's interest, paying the three partners a total of $175,000. Partnership identifiable net assets are currently reported at amounts approximating fair value.

Required - Using the transfer of capital interests approach, calculate Olivia's initial capital balance after entering the partnership?

a. $175,000

b. $170,000

c. $215,000

d. $150,000

Reference no: EM132536731

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