Question

Please correct any wrong amounts and/or categories I selected in the first section & in the journal section.

Dividing LLC Income 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 3:2. 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 $ Clark 56,000 $ Total 126,000 Salary allowance $ Remaining income 1 Net income $ Farley 70,000 13,200 83,200 8,800 22,000 $ 64,800 $ 148,000 b. Provide journal entries to close the (1) revenues and expenses and (2) drawing accounts for the two members. For a compound transaction, if an amount box does not require an entry, leave it blank. (1) Revenues Expenses Revenues Salary Expense (7) Martin Farley, Member Equity Ashley Clark, Member Equity Martin Farley, Drawing Ashley Clark, Drawing C. If the net income were less than the sum of the salary allowances, how would income be divided between the two members of the LLC? members would still be credited with their salary allowances. The difference between the net income and total salary allowances would be allocated to If the net income of the LLC were less than the sum of the salary allowances, each partner as , according to the ratio.

These are the options for the fill in the blank question.

Answer 1

Answer

• [a]

	Farley	Clark	Total
Salary allowance	$70,000	$56,000	$126,000
Remaining income	$13,200	$8,800	$22,000
Net income	$83,200	$64,800	$148,000

• [b]

	Accounts title	Debit	Credit
1	Revenues	$668,000
	Expenses		$520,000
	Farley, Equity		$83,200
	Clark, Equity		$64,800
	(revenue and expenses closed)
2	Farley, Equity	$70,000
	Clark, Equity	$56,000
	Farley, drawings		$70,000
	Clark, drawings		$56,000
	(to close drawing accounts)

• [c]

If Net Income of LLC were less than the sum of salary allowance,	BOTH	members would still be credited with their salary allowances.
The difference between net income and total salary allowances would be allocated to each partner as	A DEDUCTION
according to the	INCOME-SHARING	ratio.