Hewlett and Martin are partners. Hewlett's capital balance in the partnership is $64,000, and Martin's capital balance $67,000. Hewlett and Martin have agreed to share equally in income or loss. The existing partners agree to accept Black with a 20% interest. Black will invest $35,000 in the partnership. The bonus that is granted to Hewlett and Martin equals:

Question

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The total capital after Black's investment is $166,000 ($64,000 + $67,000 + $35,000). Black's 20% interest should be $33,200 (20% of $166,000). Since Black invests $35,000, the excess $1,800 is a bonus to Hewlett and Martin, shared equally, giving each a $900 bonus.

Hewlett and Martin Are Partners