1.4.1.3 - Capital Accounts Adjustment
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Practice Questions
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What is a new profit-sharing ratio?
💡 Hint: Consider how changes affect existing agreements.
Why is balancing capital contributions crucial?
💡 Hint: Think about fairness in partnerships.
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Interactive Quizzes
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What is the primary purpose of adjusting capital accounts when partners change?
💡 Hint: Consider why financial accuracy is important.
True or False: The new profit-sharing ratio should always favor the new partner.
💡 Hint: Think about fairness between existing and new partners.
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Challenge Problems
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A partner retires, and the current profit-sharing ratio is 50:50. The remaining partner agrees to a new ratio of 75:25. How do they adjust the capital accounts?
💡 Hint: Think about how much each partner will now earn.
Two partners, A and B, have capital accounts of $10,000 and $5,000 respectively. After admitting a new partner C, they agree on a new profit-sharing ratio of 3:1:1. How should they balance their capital?
💡 Hint: Relate capital contributions to profit-sharing.
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