5 , May cheng and hannah webster are partners who share in the income equally and have capital balances of $ 207,000 and $ 62,500 respectively .cheng , with the consent of webster, sells one-thrid of here interest to michael cross. What entry is required by the partnership if the sells price is (a) $ 60,000 ?
(b) $ 80,000 ?
6 cody jenkins and jun Ito formed a partnership ti provide lund scaping services .jenkins and Ito shared profits and losses equally. after all the tangible assets have been adjusted to current market prices , the capital accounts of cody jenkins and jun Ito have balances of $ 72,000 and $38,000, respectively.valeria solano has expertise with using the computer to prepare land scape designes , cost estimates , and renderings. jenkins and Ito deem these skills useful : thus, solano is admitted to the partnership at a 30% interest for a purchase price of $30,000.
A, determine the recipient and amount of the partner bonus.
B, provide the journal entry to admit solano into the partnership.
C, why would a bonus be paid in this situation.?
Solve this question and answer of the more explain ?
1. For the first question:
(a) If the selling price is $60,000, the entry required by the partnership would be:
Cash: $60,000
Cheng's Capital: $20,000 (1/3 of $60,000)
Cross's Capital: $20,000 (1/3 of $60,000)
Webster's Capital: $20,000 (1/3 of $60,000)
(b) If the selling price is $80,000, the entry required by the partnership would be:
Cash: $80,000
Cheng's Capital: $26,667 (1/3 of $80,000)
Cross's Capital: $26,667 (1/3 of $80,000)
Webster's Capital: $26,667 (1/3 of $80,000)
2. For the second question:
A. To determine the recipient and amount of the partner bonus, calculate the total capital balance before admitting Solano. Jenkins and Ito have a total capital balance of $110,000 ($72,000 + $38,000). Solano is admitted with a 30% interest, so her capital contribution would be $30,000. Thus, the new total capital balance becomes $140,000 ($110,000 + $30,000). Jenkins and Ito share equally, so each partner should have $70,000 ($140,000 / 2). However, Jenkins' capital balance is already $72,000, so he has a higher capital balance by $2,000. Therefore, Jenkins would receive the partner bonus of $2,000.
B. The journal entry to admit Solano into the partnership would be:
Cash: $30,000
Valeria Solano's Capital: $30,000
C. A bonus is paid in this situation to compensate Jenkins for his higher capital balance compared to Ito. It equals the difference between their capital balances ($72,000 - $70,000), which is $2,000. This bonus ensures that the partnership remains fair and equal, as Jenkins would have received less capital if it was divided equally without considering his higher initial investment.