Question

Gary, Peter, and Chris and have capital balances of $26,000, $38,000, and $30,000, respectively. As per the partnership agreement, Gary gets a profit share of 2/9; Peter gets 4/9; and Chris gets 3/9. The partnership agrees to pay $20,000 as the final settlement to Gary. How much bonus does Peter receive as a result of this transaction?
A) $3,429

B) $2,667

C) $2,571

D) $3,333

Answer 1

Answer:

A) $3,429

Explanation:

Bonus capital paid by the new shareholders will be distributed among the Old Partner on the basis of their old sharing ratio

Capital Balance of Peter = $38,000

Settlement amount = $20,000

As we does not have revised profit ratios, Peter and Chris will share profit on their old ratios.

Remaining balance of Gary's capital = $26,000 - $20,000 = $6,000

Peter Share = 4/7 x $6,000 = $3,429