The partnership of Barzini, Corleone, Stracci and Tataglia showed the following capital accounts as of December...

The partnership of Barzini, Corleone, Stracci and Tataglia showed the following capital accounts as of December 31, 2016:

partnership capital balances

barzini, capital 100,000

corleone, capital 125,000

stracci, capital 175,000

taattaglia, capital 250,000

total 650,000

Sollozzo contributes $150,000 into the partnership for a 20% interest. The four original partners share profits and losses according to the following ratio: 2:2:3:3. Using the bonus method:

determine the balances for each of the five partners after Sollozzo joins the partnership and

prepare a journal entry to record the entry of Sollozzo into the partnership. Use the templates provided below:

Expert Solution

Capital Balances of Partners After Admission

	Paid in Capital	Capital after Admission

Partner Barzini	100,000
Partner Carleone	125,000
Partner Stracci	175,000
Partner Taattaglia	250,000
Partner Sollozo	150,000	160,000	(800000*20%)

Total	800,000	800,000



When we use the bonus method , it means that the total paid in capital must equal the total capital after admission,
So it equals (800000)

The paid in capital of the new partner (150000) < his share in the capital after admission (160000 = 800000 * 20%)
so there is a bonus of 10000 (60000 – 50000) to the new partner(Solozzo).

The bonus will be allocated on a ratio of 2:2:3:3 and will be deducted from the old partners’ capital.

(Barzini) = 10000 *(2/10) = 2000

(Corleone) = 10000 * (2/10) = 2000

(Stracci) = 10000 * (3/10) = 3000

(Taattaglia) = 10000 * (3/10) = 3000

(Barzini’s capital after admission = 100000 - 2000 = 98000)

(Corleone’s capital after admission = 125000 - 2000 = 123000)

(Stracci’s capital after admission = 175000 - 3000 = 173000)

(Taattaglia’s capital after admission = 250000 - 3000 = 247000)

Solozzo’s capital after admission = 160000

ekkarill92 answered 2 years ago

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