Jane invests $5,000 for a one-fourth interest in a partnership in which the other partners have capital totaling $20,000 before admitting Jane.After distribution of the bonus,Jane's capital is:
A)$4,000.
B)$6,000.
C)$8,000.
D)$6,250.

Question

Quizplus · Accepted Answer

The total capital after admitting Jane is $25,000 ($20,000 + $5,000). As Jane has invested $5,000 for a one-fourth interest, the total value of the partnership is $20,000 (4 x $5,000).

If a bonus of $5,000 is distributed, the total partnership value increases to $25,000 ($20,000 + $5,000 bonus). Jane's one-fourth interest in the partnership is now worth $6,250 (1/4 x $25,000). Therefore, Jane's capital is $6,250 after distribution of the bonus.

Hence, the correct answer is choice D ($6,250).

Jane Invests $5,000 for a One-Fourth Interest in a Partnership