PE 12-4B Partner bonus

Joshi has a capital balance of $80,000 after adjusting assets to fair market value. Costas contributes $40,000 to receive a 40% interest in a new partnership with Joshi.

Determine the amount and recipient of the partner bonus.

Answer:

Equity of Joshi ................................................................................ $ 80,000 Costas’ contribution .......................................................................  40,000 Total equity after admitting Costas ............................................... $120,000 Costas’ equity interest.................................................................... × 40% Costas’ equity after admission...................................................... $ 48,000 Costas’ contribution .......................................................................  40,000 Bonus paid to Costas ..................................................................... $ 8,000 

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