Force and Zabala are partners.Force's capital balance in the partnership is $98,000 and Zabala 's capital balance is $53,000.Force and Zabala have agreed to share equally in income or loss.Force and Zabala agree to accept Burns with a 25% interest.Burns will invest $56,000 in the partnership.The total bonus that is granted to the existing partners equals:
A)$6,500.
B)$9,125.
C)$2,125.
D)$4,250.
E)$0,because Force and Zabala actually grant a bonus to Burns.

Question

Quizplus · Accepted Answer

First, we need to calculate the total capital balance of the partnership before Burns' investment:

Total capital balance = Force's capital balance + Zabala's capital balance
Total capital balance = $98,000 + $53,000
Total capital balance = $151,000

Next, we need to calculate Burns' capital balance after his investment:

Burns' capital balance = $56,000 x 25%
Burns' capital balance = $14,000

Now, we can calculate the new total capital balance with Burns' investment:

New total capital balance = Total capital balance + Burns' investment
New total capital balance = $151,000 + $56,000
New total capital balance = $207,000

Since Burns is receiving a 25% interest, he is entitled to 25% of the new total capital balance:

Burns' share = New total capital balance x 25%
Burns' share = $207,000 x 25%
Burns' share = $51,750

To divide the remaining balance equally between Force and Zabala, we need to subtract Burns' share from the new total capital balance and divide the result by 2:

Remaining balance = New total capital balance - Burns' share
Remaining balance = $207,000 - $51,750
Remaining balance = $155,250

Bonus for each partner = Remaining balance / 2
Bonus for each partner = $155,250 / 2
Bonus for each partner = $77,625 / 2
Bonus for each partner = $38,812.50

To find the total bonus granted to the existing partners, we add their original capital balances to their bonus amounts:

Total bonus = Force's bonus + Zabala's bonus
Total bonus = ($98,000 + $38,812.50) + ($53,000 + $38,812.50)
Total bonus = $136,812.50

Therefore, the total bonus granted to the existing partners is $4,250 (choice D) because that is half of the total remaining balance after Burns' investment.

Force and Zabala Are Partners