Question

Smith and Johnson are partners. Smith's capital balance in the partnership is $56,000, and Johnson's capital balance $42,000. Smith and Johnson have agreed to share equally in income or loss. Smith and Johnson agree to accept Benson for a 25% interest. Benson will invest $40,000 in the partnership. The bonus that is granted to Smith and Johnson equals:

Answer 1

Answer:The bonus that is granted to Smith and Johnson equals:$5,500

that is $2750 each for Smith and Johnson since they share equally.

Step-by-step explanation:

Given that

Smith's capital balance = $56,000

Johnson's capital balance = $42,000

Since the partners agree to accept Benson with 25% interest

Benson invests $40,000

Now, After allowing Benson,

Total Partnership Equity =Smith's Capital + Johnson's Capital + Benson's Investment

=$56,000 + $42,000 +$40,000 = $138,000

The share of Benson in equity is given as,

$138,000 x 25% = $34,500

The Bonus that is present for Smith and Johnson is

Benson's investment - Benson share of equity

= $40,000 - $34,500

=$5,500

Thus,

When equally shared becomes $2750 each for both Smith and Johnson