Question

LeBron, Dennis, and Susan formed the Bar TLLC at the beginning of the current year. LeBron and Dennis each contributed $200,000 and Susan transferred several acres of agricultural land she had purchased two years earlier to the LLC. The land had a tax basis of $50,000 and was appraised at $300,000. The land was also encumbered with a $100,000 nonrecourse mortgage (i.e., qualified nonrecourse financing) for which no one was personally liable. The members plan to use the land and cash to begin a cattle-feeding operation. Susan will work full time operating the business, but LeBron and Dennis will devote less than two days per year to the operation. All three members agree to split profits and losses equally. At the end of the first year, Bar T had accumulated $40,000 of accounts payable jointly guaranteed by LeBron and Dennis and had made a $9,000 principal payment on the mortgage. None of the members have passive income from other sources or business income from other sources. LeBron and Dennis are married, while Susan is single. For the first year of operations, the partnership records disclosed the following information: Sales Revenue COGS Operating Expenses Dividends Municipal Bond Int Salary pd as a guarentee to Susan Cash Dist split equally at year-end $620,000 $380,000 $670,000 $1,200 $300 $10,000 not inlcuded in expenses $3,000 1. What overall methods of accounting were initially available to Bar T? (select all that apply) Cash Accrual Hybrid

Answer 1

3,00,000 BarIT LLC Financial Statements Acconal method of Accounting. Tournal Eretres cor cash Arc Dr 400 000 to lebrom capital 2,00.000 Dennis capital 9,00.000 (being capital toolight in cash) Agricultural land ape br 300,000 to Susan capital (being capttal brought in and form) At the begining Balance sheet ind assets and 2,00,000 1-Agricultural 300,000 Dennis 200.000 Suran 300,000 Cash antland 400,000 (capital ages) Accounts payable 40,000 Suspense ale 40,000 po ovo 240.000 egpital & liabilites Lebrom Cond Balance sheet [Assuming] Asse bo copitel & liabilities lebron Dennis $$_ 300,000 48,832 48,834 1,48,834 Agricultural 0 land cash in Hond **** acionit 40,000 puyable 286.800 286.500

profit a loy ale Ho coas &3,80,ooo by sales serenie $6,20,000 operating $ 6,70.000 Copenses $10,000 Salary to Susan mostagage Loves to be distributed) $ 9,000 payment bron $ 300 1,50,168 150,166 150,166 Ant Dirtdends $ 1200 Dennis Susan (ccepitales (equally, 1070,500 10,70, 500 lebron capital 200,000 000 (150, 168 $ 48,682 Dennis capital 200,000 (-!000 GSI 50,166 $ 48,884 Susan capital 3,00,000 E 1000 G. 150, 166 41,40,634 selling

CASH METHOD OF ACCOUNTING WAS NOT AVAILABLE FOR BAR T LLC BECAUSE NO INFORMATION ABOUT CASH PAYMENTS OR RECEIPTS .