[mercedes98]

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 25% interest. Block will invest $35,000 in the partnership. The bonus that is granted to Block equals:
a.  a. $5,000.
b.  b. $2,500.
c.  c. $6,667
d.  d. $3,333
e.  e. $0, because Block must actually grant a bonus to Groh and Jackson.

[Just Looking]

When making the entry to record this transaction, you will be debiting cash for $35,000. You will be crediting Block's capital account for 25% of the total capital balance (64,000+61,000+35,000). The question is what to do with the balance.

If the value of assets added (the $35,000 cash) is less than the new partner's capital balance (25% of $160,000 = $40,000), the new partner recognizes the bonus. The $5000 difference will be debited to the old partners based on their share of net income (in this case they share equally).

If the value of assets exceeded the new partner's capital balance, the excess increases the old partners' capital balances (again based on share of net income, which is equally in this example).

Those words may sound confusing. If you break it down logically, the first thing is to compute the amount of his capital balance based on total capital times his percentage interest. Compare that to what he paid. If he paid less than that amount, he got a bonus - which is made up by the other partners. If he paid more than that, the other partners got a bonus.

Do you understand now?