Question

pleasw note the ratio is 3:1. thanks

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 3:1. 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 Farley Clark Total Salary allowance 61,000 49,000 110,000 Remaining income Net income 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. Revenues 668,000 (1) Expenses 520,000 Martin Farley, Member Equity Ashley Clark, Member Equity Martin Farley, Member Equity (2) Ashley Clark, Member Equity Drouloue Alovt

Answer 1

a.

	Farley	Clark	Total
Salary allowance	$61,000	$49,000	$110,000
Remaining income (3:1)	28,500	9,500	38,000
Net income	$89,500	$58,500	$148,000

b.

1	Revenues	$668,000
	Expenses		$520,000
	Martin Farley, Member Equity		89,500
	Ashley Clark, Member Equity		58,500
2.	Martin Farley, Member Equity	$61,000
	Ashley Clark, Member Equity	49,000
	Martin Farley, Drawing		$61,000
	Ashley Clark, Drawing		49,000

c.

If net income of the LLC were less than the sum of the salary allowances, Each members would still be credited with their salary allowances. The difference between the net income and total salary allowances would be allocated to each partner as deficit according to the income sharing ratio