According to the bonus method, how should excess contributions be allocated?

Using the bonus method to allocate excess contributions involves a specific approach that maintains the relative equity of all partners while rewarding contributions beyond their initial agreements. In this context, when a new partner contributes more capital than the agreed-upon amount, the excess is typically allocated to the existing partners based on their remaining profit and loss ratios.

This method ensures that the additional contributions are shared among the existing partners in proportion to their existing stakes in the partnership. For instance, if the profits or losses are allocated based on specified ratios, the excess contributions adjust the overall capital account balances, reflecting investment contributions fairly and keeping the partnership's equity structures intact.

This allocation method respects the initial agreements among partners and avoids favoring one particular partner, thus maintaining a sense of fairness and equity within the partnership structure. In contrast, other options would disrupt the foundational agreements among partners regarding profit and loss sharing, which could lead to conflicts and dissatisfaction within the partnership.