Question

LLC net income and statement of members' equity Instructions Chart of Accounts Schedule of Division of Income Journal Instructions Marvel Media, LLC, has three members: WLKT Partners, Madison Sanders, and Observer Newspaper, LLC. On January 1, 2012, the three members had equity of $205,400, $37,700, and $175,900, respectively. WLKT Partners contributed an additional $47,400 to Marvel Media, LLC, on June 1, 2012. Madison Sanders received an annual salary allowance of $54,500 during 2042. The members' equity accounts are also credited with 20% interest on each member's January 1 capital balance. Any remaining income is to be shared in the ratio of 433 among the three members, members. The revenues, expenses, and net income for Marvel Media, LLC for 20Y2 were $1,230,000, 891,400 and $338,600 respectively. Amounts equal to the salary and interest allowances were withdrawn by the members. Required: A. Determine the division of income among the three members B. Prepare the journal entries to close the net income and withdrawals to the individual member equity accounts. Refer to the Chart of Accounts for exact wording of account titles. c. Prepare a statement of members'aquily for 2012 D. What are the advantages of an income-sharing agreement for the members of this LLC?

Answer 1

Answer:-

A)

Schedule of Division of Income
	WLKT Partners	Madison Sanders	Observer Newspaper, LLC	Total
Salary allowance		$54,500		$54,500
Interest allowance	$41,080	$7,540	$35,180	$83,800
Remaining income (4:3:3)	$80,120	$60,090	$60,090	$200,300
Net income	$121,200	$122,130	$95,270	$338,600

Interest Allowance :

Interest Allowance = 20% Interest on each member January 1 Capital Balance.

WLKT Partner = 20 % × $205,400 = $41080

Madison Sanders = 20 % × 37,700 = $7,540

Observer Newspaper = 20% × 175,900 = 35,180

Remaining balance:

Remaining balance = Net income - Salary Allowance - Interest Allowance

Remaining balance = $338,600 - $54,500 - $83,800 = $200,300

Remaining balance is Divided in 4:3:3 Ratio

WLKT Partner share =$200,300 × 4/10 = $80120

Madison Sanders share = $200,300 × 3/10 = $60,090

Observer Newspaper share = $200,300 × 3/10 = $60,090

b. Prepare the journal entries to close the (1) net income and (2) withdrawals to the individual member equity accounts. For a compound entry, if an amount box does not require an entry, leave it blank.

	Date	Description	Debit	Credit
1)	Dec.31	Revenue A/c. Dr.	$1,230,000
		To Expense		$891,400
		To WLKT partner , member Equity A/c		$121,200
		To Madison Sanders,member Equity A/c		$122,130
		To Observer Newspaper,member Equity A/c		$95,270
		(To record closing entries of Net income)
2)	Dec 31	WLKT partner , member Equity A/c Dr.	$41,080
		Madison Sanders,Member Equity A/c Dr.(Salary+ Interest Allowance)	$62,040
		Observer Newspaper , Member Equity A/c. Dr.	$35,180
		To WLKT partner,drawing A/c		$41,080
		To Madison Sanders,drawing A/c		$62,040
		To Observer Newspaper,drawing A/c		$35,180
		(To record the drawing)

c. Prepare a statement of members' equity for 20Y2. If an amount box does not require an entry, leave it blank.

Marvel Media, LLC
Statement of Members' Equity
For the Year Ended December 31, 20Y2
	WLKT Partners	Madison Sanders	Observer Newspaper, LLC	Total
Balances, January 1, 20Y2	$205,400	$37,700	$175,900	$419,000
Capital additions	$47,400			$47,400
	$252,800	$37,700	$175,900	$466,400
Net income for the year	$121,200	$122,130	$95,270	$338,600
	$374,000	$159,830	$271,170	$805,000
Less :-Member withdrawals	$41,080	$62,040	$35,180	$138,300
Balances, December 31, 20Y2	$332,920	$97,790	$235,990	$666,700

d What are the advantages of an income-sharing agreement for the members of this LLC?

The advantages of Income sharing agreement is fairness distribution of income.If there is no income-sharing agreement, each member be credited with an equal amount of Net income.Which is not fair as the partner has different Contribution of Capital .