a. Determine the recipient and amount of the partner bonus — Cody Jenkins Lacey Tanner formed partnership provide landscaping services shared profits losses
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.
🔒
Unlock the complete assignment
You are viewing the free preview. Purchase this assignment once to reveal the complete resource.
$9.99 USD
Secure checkout is completed by Stripe.
c. Why would a bonus be paid in this situation?
SOLUTION
a. Bonus received by Solano:
a. Bonus received by Solano:
a. Bonus received by Solano:
a. Bonus received by Solano:
Cody Jenkins, capital………………………………………
Cody Jenkins, capital………………………………………
$ 78,000
$ 78,000
$ 78,000
Lacey Tanner, capital………………………………………
Lacey Tanner, capital………………………………………
46,000
Solano’s contribution………………………………………
Solano’s contribution………………………………………
32,000
Total partners’ capital after admitting Solano………………
Total partners’ capital after admitting Solano………………
$156,000
$156,000
$156,000
Solano’s equity interest after admission……………………
Solano’s equity interest after admission……………………
×
×
30%
30%
Valeria Solano, capital………………………………………
Valeria Solano, capital………………………………………
Valeria Solano, capital………………………………………
Valeria Solano, capital………………………………………
$ 46,800
$ 46,800
$ 46,800
Solano’s contribution………………………………………
Solano’s contribution………………………………………
32,000
Bonus paid to Solano………………………………………
Bonus paid to Solano………………………………………
$ 14,800
$ 14,800
$ 14,800
b.
Cash
32,000
32,000
Cody Jenkins, Capital
7,400
7,400
Lacey Tanner, Capital
7,400
7,400
Valeria Solano, Capital
46,800
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.