Question

Dividing LLC Income Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that provided a salary allowance of $61,000 and $49,000 to each member, respectively. In addition, the operating agreement specified an income-sharing ratio of 3:2. The two members withdrew amounts equal to their salary allowances. Revenues were $668,000 and expenses were $520,000, for a net income of $148,000. a. Determine the division of $148,000 net income for the year. Schedule of Division of Net Income FarleyClark Total Salary allowance Remaining income Net income Feedbacik b. Provide journal entries to close the (1) revenues and expenses and (2) drawing accounts for the two members. For a compound transaction, if an amount box does not require an entry, leave it blank. Expenses Martin Farley, Member Equity Ashley Clark, Member Equity 2) Hartin Farley Hember Equity Ashley Clark, Member Equity Martin Farley, Drawing Ashley Clark, Drawing

Answer 1

a.		Farley	Clark	Total
	Salary allowance	$            61,000	$            49,000	$ 1,10,000
	Remaining Income	$            22,800	$            15,200	$     38,000
	Net Income	$            88,800	$            59,200	$ 1,48,000
	Workings:
	Income sharing ratio	=	3:2
		Farley	Clark	Total
	Salary allowance	61000	49000	$ 1,10,000
	Remaining Income	(38000 X 3/5)	(38000 X 2/5)	$     38,000
	Net Income	(148000 X 3/5)	(148000 X 2/5)	$ 1,48,000
b.	General Journal	Debit	Credit
1	Revenues	$        6,68,000
	Expenses		$        5,20,000
	Martin Farley, Member Equity		$            88,800
	Ashley Clark, Member Equity		$            59,200
2	Martin Farley, Member Equity	$            61,000
	Ashley Clark, Member Equity	$            49,000
	Martin Farley, Drawings		$            61,000
	Ashley Clark, Drawings		$            49,000