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Join nowI 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
is this homework or a test question, sure seems like it
This is a real life situation. It is usually just reconciling bank statements and posting a mere 10 transactions per month at the end of the year. This year things got more interesting and going forward he will be hiring a bookkeeper. In the meantime, im here to help. I understand how you could think it might be related to school based on how i laid it out, but If you think its homework or a test question, just dont answer me.. and if this was homework, why would i be asking an online resource when i could go ask my teacher or someone else in the class.. im here because i dont have anyone else to consult with. im pretty sure what i did was correct, just looking for verification. Thanks to anyone who stops by with a helpful response.
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