Groh and Jackson are partners.Groh's capital balance in the partnership is $64,000 and Jackson's capital balance is $61,000.Groh and Jackson have agreed to share equally in income or loss.Groh and Jackson agree to accept Block with a 25% interest.Block will invest $35,000 in the partnership.The bonus that is granted to Block equals:
A)$5,000.
B)$2,500.
C)$6,667.
D)$3,333.
E)$0,because Block must actually grant a bonus to Groh and Jackson.

Question

Quizplus · Accepted Answer

The total capital before Block's investment is $125,000 ($64,000 + $61,000). Block's investment of $35,000 will make the total capital $160,000. Block is to receive a 25% interest, which is $40,000 (25% of $160,000). Since Block is investing $35,000, the bonus to Block is $5,000 ($40,000 - $35,000).

Groh and Jackson Are Partners