Answer:
a) Solano gets bonus of $10,800
b) Debit Cash $27,000, Jenkin's and Lacey's Capital Accounts for $5,400 each and Credit Solano Capital A/c $37,800
c) Solano gets the bonus because he brings experise and skills that are deemed useful to the partnership
Explanation:
FIrst, the completion of the question as follows:
A)Determine the recipient and the amount of the partner bonus
B) Provide the journal entry to admid Solano into the partnership
c) Why would a bonus be paid in this situation
solution
A) The first step is to determine the new partnership capital based on teh admission of Solano
= Existing Capital for the partnership = $43,000 + $56,000 = $99,000
New Paid in Capiital to Admit Solano = $99,000 + $27,000 = $126,000
The next step is to determine Solano's capital account as follows:
Solano is getting 30% share in the partnership
Therefore,
Paid in Capital = $126,000
Solano's Share of teh Partnership = 30%
Solano's capital = $126,000 x 30% = $37,800
The next step is to determine the calucation of the bonus
Solano invested 27,000 for capital of $37,800. The difference is $10,800 and this becomes the bonus
Actually bonus = $27,000 - $37,800 = -10,800
The existing partners will then share this according to their 50:50 sharing ratio
As such Jenkin's Share of Bonus = 50% x 10,800 = -5,400
Lacey = 50% x 10,800 = -5,400
Finally, since Solano had invested an amount thta is less than the book value of the share of partnership he got, the negative bonus of -10,800 calculated will be adjusted in capital account of the old partners and Solano will receive the bonus amount of -10,800
B) Journal Entry for Admission of Solano
Description Debit Credit
Cash 27,000
Jenkin's Capital A/c 5,400
Lackey's Capital A/c 5,400
Solano's Capital A/c 37,800
Being the Admission of Solano into the Partnership Business
c) The bonus being paid to Solano is because Solano is bringing in expertise in areas of landscape designs, cost setimates and rendering and these are useful and advantageous to the business.
