Question

Admitting New Partner With Bonus

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 $78,000 and $46,000, 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 $32,000.

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

Feedback

a. Determine the total capital, including the new contribution. Calculate the new partners' share of the total capital. If the new partner's contribution exceeds his share of the capital, the bonus goes to the current partners. If the new partner's share of the capital exceeds the contribution, the bonus goes to the new partner.

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

Answer 1

Name of the Partner	Capital Balance	Old Profit Sharing Ratio
Cody Jenkins	$     78,000.00	62.90%
Lacey Tanner	$     46,000.00	37.10%
Total Capital	$ 1,24,000.00
Now New partner Joined for 30% Interest, Existing Partners Share is 70% Only
Then	70%	$ 1,24,000.00
Total Capital	100%	$ 1,77,142.86
New Partners Capital		$     53,142.86
Solano Purchase Price		$     32,000.00
New partner's share of the capital exceeds the contribution, the bonus goes to the new partner
Difference		$     21,142.86	In Profit Sharing Ratio
Need to be Brought by Existing Partners
Cody Jenkins		$     13,299.54	62.90%
Lacey Tanner		$       7,843.32	37.10%
To be taken by Solano
	Debit	Credit
Cash	$     32,000.00
Cody Jenkins Capital	$     13,299.54
Lacey Tanner Capital	$       7,843.32
Solano Capital		$     53,143.00