Question

3:5 ratio part is a struggle for me..

Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that provided a salary allowance of $70,000 and $56,000 to each member, respectively. In addition, the operating agreement specified an income-sharing ratio of (3:5. )The two members withdrew amounts equal to their salary allowances. Revenues were $668,000 and expenses were $520,000, for a net income of $148,000.

a. Determine the division of $148,000 net income for the year.

Schedule of Division of Net Income
	Farley	Clark	Total
Salary allowance	$70000	$56000	$126000
Remaining income			22000
Net income	$	$	$148000

Answer 1

Answer -

Schedule of Division of Net Income
	Farley	Clark	Total
Salary allowance	$70000	$56000	$126000
Remaining income	$8250	$13750	$22000
Net income	$78250	$69750	$148000

Calculation:

As per given information, the two members withdrew amounts equal to their salary allowances.

So,

Farley withdraw amount = $70000 and

Clark withdraw amount = $56000

Therefore,

Remaining income = $148000 - $70000 - $56000 = $22000

Now, as per operating agreement income sharing ratio of Farley and Clark is 3:5

Therefore remaining income $22000 distributed to Farley and Clark in 3:5 ratio respectively.

Farley:

= $22000 * 3/8 = $8250

Clark:

= $22000 * 5/8 = $13750