Question

Marvel Media, LLC, has three members: WLKT Partners, Madison Sanders, and Observer Newspaper, LLC. On January 1, 20Y2, the three members had equity of $315,000, $80,000, and $190,000, respectively. WLKT Partners contributed an additional $80,000 to Marvel, Media, LLC, on June 1, 20Y2. Madison Sanders received an annual salary allowance of $182,700 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 $1,098,327, $488,327 and $610,000 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 Amounts equal to the salary and interest allowances were withdrawn by the members.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 b. Prepare the journal entries to close the (1) net income and (2) withdrawals to the individual member equity accounts. For a compound entry, if an amount box does not require an entry, leave it blank. (1) bil l0011

Answer 1

Solution a:

Schedule of Divison of income
Particulars	WLKT Partners	Madison Senders	Observer Newspaper LLC	Total
Salary Allowance		$1,82,700		$1,82,700
Interest Allowance (beginning capital *18%)	$56,700	$14,400	$34,200	$1,05,300
Remaining Income (610,000 - $182,700 - $105,300 = $322,000) WLKT ($322,000*4/10) Madison ($322,000*3/10) Observer ($322,000*3/10)	$1,28,800	$96,600	$96,600	$3,22,000
Net Income	$1,85,500	$2,93,700	$1,30,800	$6,10,000

Solution b:

Journal Entries - Marvel Media LLC
Particulars	Debit	Credit
Divison of net income:
Income Summary Dr	$6,10,000
To WLKT Partners, Members equity		$1,85,500
To Madison Senders Members equity		$2,93,700
To Observer Newspaper Members equity		$1,30,800
(Being Net income distributed among partners)
Withdrawl of Individual Member 's Equity:
WLKT Partners Member's Equity Dr	$56,700
Madison Senders Member's Equity Dr	$1,97,100
Observer Newspaper LLC Member's Equity Dr	$34,200
To Cash A/c		$2,88,000
(Being salary and interest withdrawn by partners)

Solution c:

Marvel Medial LLC
Statement of Member's Equity
For year ended December 31' 20Y2
Particulars	WLKT Partners	Madison Senders	Observer Newspaper LLC	Total
Balances, Janauar 1, 20Y2	$3,15,000	$80,000	$1,90,000	$5,85,000
Add: Capital Additions	$80,000			$80,000
	$3,95,000	$80,000	$1,90,000	$6,65,000
Add: Net Income for the year	$1,85,500	$2,93,700	$1,30,800	$6,10,000
	$5,80,500	$3,73,700	$3,20,800	$12,75,000
Less: Member's Withdrawl	$56,700	$1,97,100	$34,200	$2,88,000
Balances, December'31 20Y2	$5,23,800	$1,76,600	$2,86,600	$9,87,000

Solution d:

Without an income sharing agreement, each member capital will be credited with an equal proportion of the total earnings or one third each. Separate contribution should be acknowledged in the income sharing formula.