Finch and Gerhardt are partners. Finch's capital balance is $100,000 and Gerhardt's is $140,000. They agreed to share equally in profits and losses. Both partners agree to accept a third investor, Harrison as a new partner with a 25% interest in the partnership. Harrison intends to invest
$90,000 in cash. The bonus that is granted to Finch and Gerhardt equals:

Question

Quizplus · Accepted Answer

The total capital after Harrison's investment is $330,000 ($100,000 + $140,000 + $90,000). Harrison's 25% interest equals $82,500 ($330,000 * 25%). Since Harrison invests $90,000 but only gets an $82,500 interest, the difference of $7,500 is a bonus to the old partners, Finch and Gerhardt, which is divided equally between them, resulting in $3,750 each.

Finch and Gerhardt Are Partners