Keith and Jim Are Partners

question 20

Multiple Choice

Keith and Jim are partners.Keith has a capital balance of $51,000 and Jim has a capital balance of $39,000.Bill contributes a building with a fair market value of $27,000 to the partnership for an ownership interest of 20%.How much is the total bonus for the existing partners?

• A) $12,000
• B) $13,500
• C) $3600
• D) $27,000

---

Definitions:

Note Payable

A financial obligation or loan evidenced by a promissory note, which requires the borrower to pay back the amount borrowed plus interest.

Incremental Borrowing Rate

The Incremental Borrowing Rate is the interest rate a company would have to pay if it borrows funds, used in lease accounting to measure lease liabilities.

Equipment

Tangible property owned by a business that is used in its operations to generate income.

Working Capital

A measure of a company's short-term financial health and operational efficiency, calculated as current assets minus current liabilities.