George, Ringo, and John have capital balances of $80,000, $90,000 and $130,000 respectively when George and John personally agree to buy Ringo’s share of the business. George pays Ringo $35,000 for 1/3 of his equity; John pays Ringo $70,000 for the remainder. Once the transaction has been recorded, the total capital will be
To determine the new total capital, we need to calculate the amounts that George and John will contribute to the business after buying Ringo's share.
The total value of Ringo's share of the business is $35,000 + $70,000 = $<<35000+70000=105000>>105,000.
So, the total capital after the transaction is $80,000 (George's capital) + $90,000 (John's capital) + $105,000 (Ringo's share) = $<<80000+90000+105000=275000>>275,000. Answer: \boxed{275,000}.
To calculate the total capital after the transaction, we need to determine the new capital balances of each partner.
1. George's capital balance before the transaction: $80,000
- George pays Ringo $35,000 for 1/3 of his equity
- George's new capital balance: $80,000 - $35,000 = $45,000
2. John's capital balance before the transaction: $90,000
- John pays Ringo $70,000 for the remainder of his equity
- John's new capital balance: $90,000 - $70,000 = $20,000
3. Since George and John are buying all of Ringo's shares, Ringo will no longer have any capital in the business.
4. Total capital after the transaction:
- George's new capital balance: $45,000
- John's new capital balance: $20,000
- Ringo's new capital balance: $0
Total capital = George's new capital balance + John's new capital balance + Ringo's new capital balance
= $45,000 + $20,000 + $0
= $65,000
Therefore, the total capital after the transaction will be $65,000.
To find the total capital after the transaction, we need to calculate the new capital balances for George, Ringo, and John.
Let's start with George. He pays $35,000 for 1/3 of Ringo's equity. This means that Ringo's equity was worth 3 * $35,000 = $105,000. After the transaction, George's capital balance will be his initial capital balance ($80,000) plus the amount he paid for Ringo's equity ($35,000), which gives us $115,000 for George's new capital balance.
Next, we move on to John. He pays $70,000 for the remainder of Ringo's equity, which means the remainder of Ringo's equity was worth $70,000. After the transaction, John's capital balance will be his initial capital balance ($90,000) plus the amount he paid for Ringo's equity ($70,000), resulting in $160,000 for John's new capital balance.
Finally, we need to calculate Ringo's new capital balance. Since Ringo is selling his entire equity in the business, his new capital balance will be zero.
Now, we can find the total capital. It will be the sum of George's new capital balance, John's new capital balance, and Ringo's new capital balance, which gives us:
Total capital = George's new capital balance + John's new capital balance + Ringo's new capital balance
= $115,000 + $160,000 + $0
= $275,000
Therefore, the total capital after the transaction will be $275,000.