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 $52,000 and $68,000, 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.
$  

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.

c. Why would a bonus be paid in this situation?

Apparently, Jenkins and Tanner value   offered by Solano.

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	$	$

3)Nettles, King, and Tanaka are partners sharing income 3:2:1. After the firm's loss from liquidation is distributed, the capital account balances were: Nettles, $66,000 Dr.; King, $255,000 Cr.; and Tanaka, $173,000 Cr.

If Nettles is personally bankrupt and unable to pay any of the $66,000, what will be the amount of cash received by King and Tanaka upon liquidation? If an amount is zero, enter in 0. Use the minus sign to indicate any deficiencies.

Amount of Cash Received
	Nettles	King	Tanaka
Capital balances after realization	$	$	$
Distribution of partner deficiency
Capital balances after deficiency distribution	$	$	$

Answer 1

Question 1:

a.  Bonus received by Solano:
		Cody Jenkins, capital………………………………………	$ 52,000
		Lacey Tanner, capital………………………………………			68,000
		Solano’s contribution………………………………………			32,000
		Total partners’ capital after admitting Solano………………	$152,000
		Solano’s equity interest after admission……………………	×	30%
		Valeria Solano, capital………………………………………
		$ 45,600
		Solano’s contribution………………………………………			32,000
		Bonus paid to Solano………………………………………	$ 13,600
b.		Cash				32,000
		Cody Jenkins, Capital				6,800
		Lacey Tanner, Capital				6,800
		Valeria Solano, Capital					45,600

c.   

Apparently, Jenkins and Tanner value the expertise offered by Solano. Solano is able to use the computer to design and render landscape designs. This type of skill is likely to be very useful for both selling and implementing landscape ideas. Her skills can help the partnership sell ideas to clients by providing computer renderings of the designs. In this way, a client can see the design on the computer before agreeing to the work. In addition, the computer-aided landscapes provide materials plans, labor estimates, and other cost estimates for a particular design. Thus, the partners may be better able to control their costs by using Solano’s skills. Overall, they value her skills sufficiently to provide a partner bonus upon her admittance to the partnership.

Question 2:

a.

Cash balance …………………………………….     $38,000

Sum of capital accounts …………………………. 50,000

Loss on realization..………………………….….   $12,000

  Hewitt Patel

Capital balances before realization……………… $30,000           $20,000

b. Division of loss on realization*…………… 6,000 6,000

Balances ……………………………………..… $24,000   $14,000

c.

Cash distributed to partners …………………    24,000     14,000

Final balances ………………………………….   $        0            $         0

* $12,000 ÷ 2.

Question 3:

	Nettles	King	Tanaka
Capital balances after realization…..	$(66,000)	$ 255,000	$173,000
Distribution of partner deficiency	66,000	(44,000)*	(22,000)**
Capital balances after deficiency
Distribution ………………………	$          0	$ 211,000	$151,000

* $66,000 × 2/3

** $66,000 × 1/3.