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:
A)$5,000.
B)$2,500.
C)$6,667.
D)$3,333.
E)$0,because Black must actually grant a bonus to Hewlett and Martin.

Question

Quizplus · Accepted Answer

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