I help a friend out with his bookkeeping for his small business at the end of each year for free, this year he said they had a change in ownership in the middle of the year and provided me with the relevant information. I'm hoping someone can just confirm what I did was correct..
Equity - pre change (company been in loss for a few years, it is negative equity)
Partner A: ($141,954)
Partner B: ($141,954)
Facts:
1. Partner A & new Partner C invested $125,000/$500,000 respectively into the business (held in escrow by law firm)
2. Law firm paid itself $10k in legal fees and a mandated accrued exp had to be paid out of $50k, remaining deposited into the bank account.
AJE:
| | DR | CR |
| A's Partner Contr | | 125,000 |
| C's Partner Contr | | 500,000 |
| Bank Account | 565,000 | |
| Legal/Prof Fees | 10,000 | |
| Accrued Expense | 50,000 | |
New Equity:
Partner A - ($16,954)
Partner B - ($141,954)
Partner C - $500,000
Total - $341,090
More Facts:
3. Partner D & Partner E purchased the ownership of Partner B directly from him (paid $125,000/$100,00, respectively).
4. The 3 facts above are all connected to the fact that in the end, Partner B was bought out of his ownership and the cap table is as follows:
| A | 36.569% |
| B | 0% |
| C | 43.746% |
| D | 10.936% |
| E | 8.749% |
So my entire question comes down to whether or not this next entry was correct..
| | DR | CR | Explanation |
| B's distr account | | 141,954 | to zero him out |
| A's equity | | 16,954 | thought it would be easier to zero out account and then using new cap % back into it |
| C's equity | 500,000 | | same as above |
| A's equity | | 124,733 | 124,733/341,090 = 36.569% |
| C's equity | | 149,213 | 149,213/341,090 = 43.746% |
| D's equity | | 37,302 | ties to % |
| E's equity | | 29,842 | ties to % |
Thanks to anyone who took the time to read this,
Austin
