Question

Statement of LLC Liquidation Lester, Torres, and Hearst are members of Arcadia Sales, LLC, sharing income and losses in the ratio of 2:2:1, respectively. The members decide to liquidate the limited liability company. The members' equity prior to liquidation and asset realization on August 1 are as follows: Lester $14,700 34,100 Torres Hearst 21,200 Total $70,000 In winding up operations during the month of August, noncash assets with a book value of $92,100 are sold for $114,200, and liabilities of $30,800 are satisfied. Prior to realization, Arcadia Sales has a cash balance of $8,700. a. Prepare a statement of LLC liquidation. Enter any subtractions (balance deficiencies, payments, cash distributions, divisions of loss, sale of assets) as negative numbers using a minus sign. If an amount is zero, enter "0".

Answer 1

Solution:

a.)

	Cash +	Noncash Assets =	Liabilities +	Member Equity Lester + (2/5)	Member Equity Torres +(2/5)	Member Equity Hearst (1/5)
Balance before realization	$8,700	$92,100	$30,800	$14,700	$34,100	$21,200
Sales of assets and division of gain	+114,200	- $92,100	___	+$8,840($114,200 - $92,100 =$22,100, $22,100 × 2/5)	$8,840 ($22,100 ×2/5)	$4,420($22,100 × 1/5)
Balance after realization	$122,900	$0	$30,800	$23,540	$42,940	$25,620
Payment of liabilities	- $30,800	___	- $30,800	_____	____	____
Balance after payment of liabilities	$92,100	$0	$0	$23,540	$42,940	$25,620
Cash distributed to members	- $92,100	___	____	- $23,540	-$42,940	- $25,620
Final balance	$0	$0	$0	$0	$0	$0

b.)

Journal entry:

No.of event	General Journal	Debit	Credit
1	Lester, Member Equity	$23,540
	Torres, Member Equity	$42,940
	Hearst, Member Equity	$25,620
	Cash		$92,100
	(To record the final cash distribution to members)

c.)

The income and loss - sharing ratio is only used to distribute the gain or loss on the realization of assets sales. It is not used for the final distribution.