Hewlett and Martin are partners. Hewlett's capital balance in the partnership is $64,000, and Martin's capital balance $61,000. Hewlett and Martin have agreed to share equally in income or loss. Hewlett and Martin agree to accept Black with a 25% interest. Black will invest $35,000 in the partnership. The bonus that is granted to Black equals:

Question

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The total capital after Black's investment is $160,000 ($64,000 + $61,000 + $35,000). Black's 25% interest should be $40,000 (25% of $160,000), but Black only invests $35,000, resulting in a $5,000 bonus to Black.

Hewlett and Martin Are Partners