Question

Hewlett and Martin are partners. Hewlett's capital balance in the partnership is $58,000, and Martin's capital balance $55,000. Hewlett and Martin have agreed to share equally in income or loss. The existing partners agree to accept Black with a 20% interest. Black will invest $36,200 in the partnership. The bonus that is granted to Hewlett and Martin equals:________.
A) $0, because Hewlett and Martin actually grant a bonus to Black.
B) $3,600 each.
C) 1,847 to Hewlett; $1,800 to Martin.
D) $1,847 each.
E) $2,900 each.

Answer 1

Answer:

$3,180

Explanation:

Since Hewlett's capital balance is $58,000 and Martin's capital balance is $55,000, combined both partner's equity = $113,000

Black invests $36,200 for 20% of the partnership which increases total equity to $149,200. Black's 20% has a capital balance of $29,840, the difference ($6,360) should be divided equally between Hewlett's and Martin's capital balance since they agreed to divided equally all income or losses. They both receive a bonus of $3,180 (= $6,360 / 2)