SS Partnership Capital Calculation

How much will Fozzie be required to invest for a 20% interest in the SS partnership?

a) $120,000

b) $40,000

c) $50,000

d) $160,000

Answer:

Correct option is C) $50,000.

In the given SS partnership, Fozzie needs to invest $3,000,000 for a 20% interest.

Explanation:

In the SS partnership, Fozzie wants a 20% interest. To calculate the amount Fozzie needs to invest, we need to determine the total capital balance of the partnership and then calculate 20% of that value.

Given that Bert, Ernie, and Gonzo share income in the ratio of 35:55:10, we can calculate their capital balances as follows:

Bert's capital balance = $15 million x (35%) = $5.25 million

Ernie's capital balance = $15 million x (55%) = $8.25 million

Gonzo's capital balance = $15 million x (10%) = $1.5 million

The total capital balance of the partnership is $5.25 million + $8.25 million + $1.5 million = $15 million

So, Fozzie needs to invest 20% of $15 million, which is $3 million.

Therefore, the correct answer is option b) $3,000,000.