Question

Alert Medical, LLC, consists of two doctors, Abrams and Lipscomb, who share in all income and losses according to a 2:3 income-sharing ratio. Dr. Lin has been asked to join the LLC. Prior to admitting Lin, the assets of Alert Medical were revalued to reflect their current market values. The revaluation resulted in medical equipment being increased by $43,000. Prior to the revaluation, the equity balances for Abrams and Lipscomb were $153,000 and $216,600, respectively.

	Required:
A.	On December 31, provide the journal entry for the asset revaluation. Refer to the Chart of Accounts for exact wording of account titles.
B.	On December 31, provide the journal entry for the bonus under the following independent situations (refer to the Chart of Accounts for exact wording of account titles): 1. Lin purchased a 30% interest in Alert Medical, LLC, for $236,800. 2. Lin purchased a 25% interest in Alert Medical, LLC, for $118,200.

CHART OF ACCOUNTS
Alert Medical, LLC
General Ledger
ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 113 Allowance for Doubtful Accounts 114 Interest Receivable 115 Notes Receivable 116 Inventory 117 Office Supplies 118 Store Supplies 119 Prepaid Insurance 120 Land 123 Medical Equipment 124 Accumulated Depreciation-Medical Equipment 129 Asset Revaluations 133 Patent LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Abrams, Member Equity 311 Abrams, Drawing 312 Lipscomb, Member Equity 313 Lipscomb, Drawing 314 Lin, Member Equity 315 Lin, Drawing	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 520 Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Equipment 523 Delivery Expense 524 Repairs Expense 529 Selling Expenses 531 Rent Expense 533 Insurance Expense 534 Office Supplies Expense 535 Store Supplies Expense 536 Credit Card Expense 537 Cash Short and Over 538 Bad Debt Expense 539 Miscellaneous Expense 710 Interest Expense

Refer to the Chart of Accounts for exact wording of account titles. Scroll down to access pages 10 and 11 of the journal.

A. On December 31, provide the journal entry for the asset revaluation.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3

B. On December 31, provide the journal entry for the bonus under the following independent situations:

1. Lin purchased a 30% interest in Alert Medical, LLC, for $236,800.

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

2. Lin purchased a 25% interest in Alert Medical, LLC, for $118,200.

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

Answer 1

Particulars	Debit	Credit
a.
Medical equipment	43000
Abrams,member equity(43000*2/5)		17200
Lipscomb,member equity(43000*3/5)		25800
b.
1)
Cash	236800
Abrams,member equity(41980*2/5)		16792
Lipscomb,member equity(41980*3/5)		25188
Lin, Member equity		194820
Workings
Abrams member equity	170200
(153000+17200)
Lipscomb member equity	242400
(216600+25800)
Lin member equity	236800
total equity after admitting Lin	649400
Lins equity interest after admission	30%
Lin,member equity	194820
Contribution by lin	236800
Lin's equity interest after admission	194820
Bonus paid to abrams and lipscomb	41980
2)
Cash	118200
Abrams,member equity(3750*2/5)	1500
Lipscomb,member equity(3750*3/5)	2250
Lin, Member equity		121950
Workings
Abrams member equity	153000
(153000+17200)
Lipscomb member equity	216600
(216600+25800)
Lin member equity	118200
total equity after admitting Lin	487800
Lins equity interest after admission	25%
Lin,member equity	121950
Contribution by lin	118200
Lin's equity interest after admission	121950
Bonus paid to abrams and lipscomb	-3750