Accounting Midterm Exam ACG-2011: Question 23

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 20% interest. Block will invest $35,000 in the partnership. The bonus that is granted to Groh and Jackson equals:

	$1,875 each.
	1,920 to Groh; $1,830 to Jackson.
	$3,750 each.
→	$1,500 each.
	$0, because Groh and Jackson actually grant a bonus to Block.

Total partnership equity = $64,000 + $61,000 + $35,000 = $160,000.
Equity of Block (20% × 160,000) = $ 32,000.
Bonus available for the old partners = ($35,000 − 32,000)/2 = $1,500 each.