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, 20Y2, the three members had equity of $260,000, $65,000, and $155,000, respectively. WLKT Partners contributed an additional $70,000 to Marvel, Media, LLC, on June 1, 2022. Madison Sanders received an annual salary allowance of $150,800 during 20Y2. The members' equity accounts are also credited with 18% 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 $767,324, $267,324 and $500,000 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 Amounts equal to the salary and interest allowances were withdrawn by the members.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 Madison Sanders Observer Newspaper, LLC Total Salary allowance Interest allowance Remaining income (4:3:3) Net income

Answer 1

A.		Allocation of partnership income
						WLKT	Madison	Observer	Total
	Net income								500000
	Salary allowances						150800		150800
	Balance of income								349200
	Interest allowances					46800	11700	27900	86400
	(Jan 1 capital balance*18%)					(260000*18%)	(65000*18%)	(155000*18%)
	Balance of income								262800
	Balance allocated at 4:3:3					105120	78840	78840	262800
						(262800*4/10)	(262800*3/10)	(262800*3/10)
	Balance of income								0
	Share of the partners					151920	241340	106740	500000
B.	Date	Account titles					Debit	Credit
	Dec 31.	Income summary					500000
		WLKT partners,Member equity						151920
		Madison sanders,Member equity						241340
		Observer newspaper,LLC,Member equity						106740
		(To close net income)
	Dec 31.	WLKT partners,Member equity					46800
		Madison sanders,Member equity					162500
		Observer newspaper,LLC,Member equity					27900
		WLKT partners,Drawing				(0+46800)		46800
		Madison sanders,Drawing				(150800+11700)		162500
		Observer newspaper,LLC,Drawing				(0+27900)		27900
		(Drawings=Salary allowance+Interest allowance)
		(To close withdrawals)
C.			Statement of member's equity:
						WLKT	Madison	Observer	Total
	Balance as on Jan 1.					270000	70000	160000	500000
	Capital additions					70000	0	0	70000
						340000	70000	160000	570000
	Net income for the year					151920	241340	106740	500000
						491920	311340	266740	1070000
	Member withdrawals					46800	162500	27900	237200
	Balance as on Dec 31.					445120	148840	238840	832800
d.	Advantages:
	This income sharing agreement considers based on capital contribution and member's level of expertise
	Interest allowance considers capital contribution
	Salary allowance considers member's level of expertise
	Without an income sharing agreement,each member would be credited with an equal proportion of the total earnings, or one-third each.
	Separate contributions should be acknowledged in the income-sharing formula