Optimistic Business Partnership Growth
What happened in the current year regarding George and Ben's business partnership?
Which of the following is TRUE regarding the partnership balance sheet?
A) Both George, Capital and Ben, Capital will increase by $9900.
B) George, Capital will increase by $7400 and Ben, Capital will increase by $2500.
C) George, Capital will increase by $9900 and Ben, Capital will remain unchanged.
D) George, Capital will increase by $5445 and Ben, Capital will increase by $4455.
Answer: B) George, Capital will increase by $7400 and Ben, Capital will increase by $2500
The Capital Accounts reflect the investments by the various shareholders in the business. It is based on the worth of what was contributed. As George made a cash contribution of $7,400, George's capital account must be increased by the same amount of $7,400 to reflect the investment that George has made. The same goes for Ben.
George and Ben's business partnership is thriving with their recent equipment purchase. George's ownership interest of 55% and Ben's ownership interest of 45% show a healthy balance of contributions. The decision to finance the equipment purchase through cash contributions from both partners reflects their dedication to the growth of the partnership.
By increasing their capital accounts accordingly, George and Ben are ensuring that the partnership's financial position remains strong. This strategic move not only benefits the partnership in the short term but also sets a solid foundation for future growth and success.
Overall, the optimistic outlook for George and Ben's business partnership is clear. With careful financial decisions and a collaborative approach, they are well-positioned to achieve their shared goals and expand their business ventures in the future.