Reference no: EM132951994
Question - Donkey desires to purchase a one-fourth capital and profit and loss interest in the partnership of Shrek, Fiona, and Muffin. The three partners agree to sell Donkey one-fourth of their respective capital and profit and loss interests in exchange for a total payment of $125,000. The payment is made directly to the individual partners. The capital accounts and the respective percentage interests in profits and losses immediately before the sale to Donkey follow:
Capital Accounts Percentage Interests in Profits and Losses
Shrek $210,000 60%
Fiona 130,000 25
Muffin 60,000 15
Total $400,000
All other assets and liabilities are fairly valued above. Immediately after Donkey's acquisition, what should be the capital balances of Shrek, Fiona, and Muffin, respectively?
A) $157,500; $97,500; $45,000
B) $195,000; $123,750; $56,250
C) $222,500; $138,750; $63,750
D) $260,000; $165,000; $75,000
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