Question

1.) Cody Jenkins and Lacey Tanner formed a partnership to provide landscaping services. Jenkins and Tanner shared profits and losses equally. After all the tangible assets have been adjusted to current market prices, the capital accounts of Cody Jenkins and Lacey Tanner have balances of $37,000 and $48,000, respectively. Valeria Solano has expertise with using the computer to prepare landscape designs, cost estimates, and renderings. Jenkins and Tanner deem these skills useful; thus, Solano is admitted to the partnership at a 30% interest for a purchase price of $23,000.

a. Determine the recipient and amount of the partner bonus.
$  

b. Provide the journal entry to admit Solano into the partnership. For a compound transaction, if an amount box does not require an entry, leave it blank.

	Cash
	Cody Jenkins, Capital
	Lacey Tanner, Capital
	Valeria Solano, Capital

2.)

Hewitt and Patel are partners, sharing gains and losses equally. They decide to terminate their partnership. Prior to realization, their capital balances are $30,000 and $20,000, respectively. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $38,000.

a. What is the amount of a gain or loss on realization?

$

b. How should the gain or loss be divided between Hewitt and Patel?

Hewitt
Patel

c. How should the cash be divided between Hewitt and Patel? If an amount is zero, enter "0".

Hewitt and Patel
Distribution of Cash
	Hewitt	Patel
Capital balances before realization	$	$
Division of gain or loss on realization
Balances	$	$
Cash distributed to partners
Final balances	$	$

Answer 1

a. Determination of Receipint and amount of Partner Bonus
Partner's capital before Admission
Partner	Amount	Percentage of Capital
Cody Jenkins	$37,000	43.53%
Lacey Tanner	$48,000	56.47%
Total Capital	$85,000	100.00%
Partner's capital After Admission
Partner	Amount
Cody Jenkins	$37,000
Lacey Tanner	$48,000
Valeria Solano	$23,000
Total Capital	$108,000
Partner Bonus = Share in Capital - Purchase Price
=30% * $108,000 - $23,000
=$9,400
Valeria Solano will receive the bonus of $9,400

b. Journal Entry to Admit Valeria Solano
	Debit	Credit
Cash	$23,000
Cody Jenkins, Capital	$4,700
Lacey Tanner, Capital	$4,700
Valeria Solano, Capital		$32,400

* Partner bonus has to be adjusted in existing partners capital in existing profit sharing ratio i.e. $9,400 * 50% =$4,700 from Cody Jenkins capital and $4,700 from Lacy Tanners capital

2
a. Amount of Gain or loss on Realization =$30,000 + $20,000 -$38,000
=$12,000
b.
as given in question Hewitt and Patel sharing gains and losses equally
Hewitt ($12,000 / 2)	$6,000
Petal ($12,000 / 2)	$6,000
c. How should the cash be divided between Hewitt and Patel? If an amount is zero, enter "0".
Hewitt and Patel
Distribution of Cash
	Hewitt	Patel
Capital balances before realization	$30,000	$20,000
Division of gain or loss on realization	-$6,000	-$6,000
Balances	$24,000	$14,000
Cash distributed to partners (in Capital Ratio)	$24,000	$14,000
Final balances	$0	$0