Andrew Hall and Brian Li formed a partnership to provide landscaping services. H
ID: 2364904 • Letter: A
Question
Andrew Hall and Brian Li formed a partnership to provide landscaping services. Hall and Li shared profits and losses equally. After all the tangible assets have been adjusted to current market prices, the capital accounts of Andrew Hall and Brian Li have balances of $54,000 and $71,000 respectively. Kristin Lane has expertise with using the computer to prepare landscape design, costs estimates, and rendering. Hall and Li deems these skills useful; thus, Lane is admitted to the partnership at a 0 interest fro a purchase price of 35,000. Questions: A)Determine the recipient and amount of the partner bonus. B) Provide journal entry to admit Lane into the parntership. C) Why would a bonus be paid in this situation.Explanation / Answer
As Hall & Li share P&L equally, their share is 1:1 Post admission of Lane at 0 Interest, P&L of Hall & Li wont change. A)Determine the recipient and amount of the partner bonus. Bonus to Hall & Li will be in ratio 1:1 ie $17500 each (35000/2) B) Provide journal entry to admit Lane into the parntership. mmddyy Cash Dr 35000 Lane's capital a/c Cr 35000 mmddyy Lane capital a/c Dr 35000 Hall's capital a/c Cr 17500 Li's capital A/c Cr 17500 C) Why would a bonus be paid in this situation. As Lane is admitted by paying $35000 which is for partneship, Bonus is payable