Admission of a new partner under the bonus method

When a new partner is admitted under the bonus method in a partnership, the primary result is the allocation of a bonus to the existing or old partners. This bonus is provided to compensate the old partners for the goodwill of the partnership that they have established over time.

The bonus serves as a way to adjust the capital accounts of the original partners, ensuring that they are fairly compensated for the value they bring to the partnership. The bonus amount is typically determined based on the agreed upon percentage and is added to the capital accounts of the old partners.

Therefore, in answer to the question of what happens when a new partner is admitted under the bonus method, the correct response is that the bonus is given to the old partners only. This practice helps maintain equity among the partners and acknowledges the contribution of the existing partners to the partnership's success.