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After their successful first year of operations, the partners decide it's time to expand their operations. In order to do so , they'll need more
After their successful first year of operations, the partners decide it's time to expand their operations. In order to do so they'll need more cash. They reach out to additional Auggie alums who have been very successful so far in their careers to see if they're interested in joining their partnership. Reina and Fatuma started their own consulting firm a couple years ago and have been extremely successful, resulting in plenty of excess cash available. Fatuma has her hands full running the daily operations of their business and doesn't have the capacity to join in a new project. But Reina agrees to buy into HiloSati, LLP as an investor, but will not assist in managing the business or daily operations.
The three partners agree on the following terms and amend their partnership agreement accordingly:
Amendments to HiloSati, LLP Partnership Agreement January
Reina will contribute $ of cash into the business in exchange for a beginning capital balance. The partnership will use the bonus method to account for her contribution, with any "bonus" split between the original partners based on their original profitloss percentages to Andrew and to Ayman
All of the original provisions in the agreement will continue to apply, with exception to the following changes:
Distributions Reina will be able to take yearend cash distributions equal to of her allocated partnership net income each year.
ProfitLoss Allocations Inserted in the original "waterfall" after provision #: Reina shall receive an "interest" allocation equal to of total partnership net income.
ProfitLoss Allocations Amendment to the final allocation with the partners receiving the following profitloss allocations for any remaining profitloss:
Andrew
Ayman
Reina
Requirement #
Determine each partner's capital balance after Reina's contribution and record the journal entry for her contribution into the business as of January Note there may be extra rows shaded in blue, or you may need to add rows.
Date Account Description Debits Credits
Cash
Capital Andrew
Capital Ayman
Capital Reina
Requirement #
During the business earned net income of $ and all available distributions were taken. Determine each partner's ending capital balance as of December
Capital Andrew Capital Ayman Capital Reina
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