Question

LLC Net Income and Statement of Members' Equity Marvel Media, LLC, has three members: WLKT Partners, Madison Sanders, and Observer Newspaper, LLC. On January 1, 2012, the three members had equity of $305,000, $75,000, and $185,000, respectively. WLKT Partners contributed an additional $80,000 to Marvel, Media, LLC, on June 1, 20Y2. Madison Sanders received an annual salary allowance of $176,900 during 2042. The members' equity accounts are also credited with 15% interest on each member's January 1 capital balance. Any remaining income is to be shared in the ratio of 4:3:3 among the three members. The revenues, expenses, and net income for Marvel Media, LLC, for 20Y2 were $689,311, $169,311 and $520,000 respectively. Amounts equal to the salary and interest allowances were withdrawn by the members. a. Determine the division of income among the three members. If an amount box does not require an entry, leave it blank. Schedule of Division of Income WLKT Partners Observer Newspaper, LLC Madison Sanders $ 176,900 Total $ 176,900 Salary allowance Interest allowance $ 45,750 11,250 $ 27,750 84,750 Remaining income (4:3:3) 103,340 77,505 77,505 258,350 Net income $149,090 $ 265,655 $ 105,225 $ 520,000 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. (1) Revenues 689,311 Expenses 169,311 WLKT Partners, Member Equity 149,090 Madison Sanders, Member Equity 265,655 105,225 Observer Newspaper, LLC, Member Equity (2) -

Answer 1

a.

Schedule of Division of Income
	WLKT Partners	Madison Sanders	Observer Newspaper, LLC	Total
Salary allowance	0	176900	0	176900
Interest allowance	45750	11250	27750	84750
Remaining income (4:3:3)	103340	77505	77505	258350
Net income	149090	265655	105255	520000

Kindly rectify the total net income under column for Observer Newspaper, LLC as has been shown above.

b.

	Account Titles and Explanation	Debit	Credit
(1)	Income summary	520000
	WLKT Partners, Member's equity		149090
	Madison Sanders, Member's equity		265655
	Observer Newspaper, LLC, Member's equity		105255
	(To close net income)
(2)	WLKT Partners, Withdrawals	45750
	Madison Sanders, Withdrawals	188150
	Observer Newspaper, LLC, Withdrawals	27750
	Cash		261650
	(To record member withdrawals)

c.

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	305000	75000	185000	565000
Capital additions	80000	0	0	80000
	385000	75000	185000	645000
Net income for the year	149090	265655	105255	520000
	534090	340655	290255	1165000
Member withdrawals	45750	188150	27750	261650
Balances, December 31, 20Y2	488340	152505	262505	903350

d. Without an income-sharing agreement, each member will be credited with an equal proportion of the total earnings, or one-third each. Separate contributions will be acknowledged in the income-sharing formula.