Answer:
The journal entry to reflect Smith's new capital balance will include a credit to Smith, Capital in the amount of $30,000.
Explanation:
<em>Step 1: Determine Smith's capital balance</em>
Smith's new capital balance can be expressed as shown;
C=I+B1+B2
where;
C=new capital balance
I=Smith's capital investment
B1=T. Bina bonus amount
B2=M. Valley bonus amount
In our case;
C=unknown, to be determined
I=$20,000
B1=$5,000
B2=$5,000
Replacing;
C=(20,000+5,000+5,000)=$30,000
New capital balance=$30,000
<em>Step 2: Record Smith's New Capital balance </em>
Account Debit Credit
Cash 30,000
Smith 30,000
A credit to Smith, Capital in the amount of $30,000
