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.b. Provide the journal entry to admit Solano into the partnership.c. Why would a bonus be paid in this situation?

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Asked Dec 19, 2019
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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.
b. Provide the journal entry to admit Solano into the partnership.
c. Why would a bonus be paid in this situation?

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Expert Answer

Step 1

Partnership 

It is that form of organization which is owned and managed by two or more persons who invest and share the profits and losses according to a pre-determined ratio.

Step 2

a.

Determine the amount of partner bonus.

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1. Capital balances of partner J and T after Revaluation- Total J Capital balances after revaluation $78,000 $46,000 S124,000 2. Calculation of S's equity @ 30%- $124,000 Total equity balance after revaluation (A) Contributed by S (B) Total equity balance after admission of S $32,000 (C) = (A) + (B) $156,000 S's equity interest after admission S's equity @ 30% (D) = (C) × 30% 30% S46,800 3. Calculation of Bonus paid to S Contribution by S S's equity after admission Bonus paid to S $32,000 $46,800 S14,800

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Step 3

b.1

The journal entry for the admission of...

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Debit Date Account Titles and Explanation Credit Cash S32,000 J. Capital (1) T, Capital (1) S. Capital (To record the admission of S in the partnership firm) $7,400 S7,400 $46,800 Working Note (1) Contribution of J and T partners in the bonus of S Partners J and T, share the profits and losses equally; so each partner will contribute (s14.00) $7,400 S14,800×- as bonus to the new admitted partner S.

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