Admitting New Partner With Bonus Cody Jenkins and Lacey Tann

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 $32,000 and $42,000, 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 $20,000. 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.

Solution

Solution a:

Ratio of profit between jenkin and tanner = 1:1

Total capital after new capital introduced by Solano = $32,000 + $42,000 + $20,000 = $94,000

Solano share in Partnership = 30%

Therefore required share of capital by Solano = 94000 * 30% = $28,200

As capital introduced by Solano is lesser by $8,200 therefore old partner capital share will be given to Solano in their profit sharing ratio i.e. 1:1

Therefore recepient of bonus is solano and amount of partner bonus = $8,200

Solution b:

Solution c:

The bonus is paid in this transaction becuase apparently, jenkins and tanner value is higher than value offered by Solano.

Journal Entries
Event	Particulars	Debit	Credit
a	Cash Dr	$20,000.00
	Jenkins Capital Dr	$4,100.00
	Tanner\'s Capital Dr	$4,100.00
	To Solano\'s Capital		$28,200.00
	(To record solano admission in partnership)