Question

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 $77,900 and $34,800, 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 $27,400.

CHART OF ACCOUNTS
Jenkins, Tanner, and Solano
General Ledger
ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 113 Allowance for Doubtful Accounts 114 Interest Receivable 115 Notes Receivable 116 Inventory 117 Office Supplies 118 Store Supplies 119 Prepaid Insurance 120 Land 123 Equipment 124 Accumulated Depreciation-Equipment 129 Asset Revaluations 133 Patent LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Cody Jenkins, Capital 311 Cody Jenkins, Drawing 312 Lacey Tanner, Capital 313 Lacey Tanner, Drawing 314 Valeria Solano, Capital 315 Valeria Solano, Drawing	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 520 Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Equipment 523 Delivery Expense 524 Repairs Expense 529 Selling Expenses 531 Rent Expense 533 Insurance Expense 534 Office Supplies Expense 535 Store Supplies Expense 536 Credit Card Expense 537 Cash Short and Over 538 Bad Debt Expense 539 Miscellaneous Expense 710 Interest Expense

	Required:
A.	Determine the recipient and amount of the partner bonus.
B.	On December 31, provide the journal entry to admit Solano into the partnership. Refer to the Chart of Accounts for exact wording of account titles.
C.	Why would a bonus be paid in this situation?

A. Determine the recipient(s) and amount of the partner bonus.

Recipient(s): Check all that apply.

Lacey Tanner

Valeria Solano

Cody Jenkins

Amount of the partner bonus: .

B. On December 31, provide the journal entry to admit Solano into the partnership. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

C. Why would a bonus be paid in this situation?

Jenkins and Tanner apparently value the expertise offered by Solano.

Solano apparently is willing to pay extra for the privilege of joining the partnership.

Jenkins and Tanner apparently want to ensure that all assets are valued appropriately when taking on a new partner.

Answer 1

Total Capital	140100		=77900+34800+27400
Solano's share	42030		=140100*30%
a
Recipient	Valeria Solano
Amount of the partner bonus	14630		=42030-27400

b
Date	Description	Debit	Credit	Assets	Liabilities	Equity
December 31	Cash	27400		↑
	Cody Jenkins, Capital	7315				↓
	Lacey Tanner, Capital	7315				↓
	Valeria Solano, Capital		42030			↑
	c
	Jenkins and Tanner apparently value the expertise offered by Solano.