The partnership agreement of Powell, Gaunt, and Holl allows Gaunt a bonus of 10% of income after the bonus, salaries of $30,000 per partner and interest of 6% on average capital balances of $120,000, $150,000, and $180,000 for Powell, Gaunt, and Holl, respectively. The amount of Gaunt's bonus, assuming income before bonus, salaries, and interest of $315,000, is

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Gaunt's bonus is calculated as 10% of the income after deducting the bonus itself, salaries, and interest. First, calculate the total salaries ($30,000 * 3 = $90,000) and interest on the capital balances (6% of $120,000 + 6% of $150,000 + 6% of $180,000 = $7,200 + $9,000 + $10,800 = $27,000). The total deductions before the bonus are $117,000 ($90,000 + $27,000). Subtract this from the income before bonus, salaries, and interest ($315,000 - $117,000 = $198,000). Gaunt's bonus is 10% of the remaining income after his bonus is deducted. Let B be the bonus. The equation is B = 10% * ($198,000 - B). Solving for B gives B = $19,800.

The Partnership Agreement of Powell, Gaunt, and Holl Allows Gaunt