Groh and Jackson are partners. Groh\'s capital balance in the partnership is $64
ID: 2353264 • Letter: G
Question
Groh and Jackson are partners. Groh's capital balance in the partnership is $64,000, and Jackson's capital balance $61,000. Groh and Jackson have agreed to share equally in income or loss. Groh and Jackson agree to accept Block with a 20% interest. Block will invest $35,000 in the partnership. The bonus that is granted to Groh and Jackson equals:A. $1,500 each.
B. $1,875 each.
C. $3,750 each.
D. 1,920 to Groh; $1,830 to Jackson.
E. $0, because Groh and Jackson actually grant a bonus to Block.
Please provide explanation of answer
Explanation / Answer
1. c. Addition of a partner who pays a bonus to each of the other partners.
2. a. $1,500 each
Total partnership equity = $64,000 + $61,000 + $35,000 = $160,000
Equity of Block = $160,000 x 0.20 = $32,000
Bonus to old partners = $35,000 - $32,000 = $3,000, split equally
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3. a.$5,000
Total partnership equity = $64,000 + $61,000 + $35,000 = $160,000
Equity of Block = $160,000 x 0.25 = $40,000
Bonus to Block = $40,000 - $35,000 = $5,000
___________________________________________
4. a.
McCarthy, Capital 15,000
Harris, Capital 15,000
Cash 30,000
____________________________________________
5. b.
McCarthy, Capital 12,000
Harris, Capital 12,000
Cash 24,000
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