Reference no: EM132934123

Mary admits Jaja as a partner in the business. Balance sheet accounts of Mary just before the admission of Jaja shows: Cash, $43,000, Accounts Receivable, $150,000, Merchandise Inventory, $170,000, and Accounts Payable, $52,000.

It was agreed that for purposes of establishing Mary's interest, the following adjustments should be made:

1) an allowance for doubtful accounts of 3% of accounts receivable is to be established;

2) merchandise inventory is to be increased by $25,000; and

3) prepaid expenses of $7,600 and accrued liabilities of $4,800 are to be recognized.

Problem 1: If Jaja is to invest sufficient cash to obtain 2/5 interest in the partnership, how much should she contribute to the new business?