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 $200,000, $40,000, and $160,000, respectively. WLKT Partners contributed an additional $50,000 to Marvel Media, LLC, on June 1, 20Y2. Madison Sanders received an annual salary allowance of $55,000 during 20Y2. The members' equity accounts are also credited with 10% 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 $1,260,000, 5900,000, and $360,000, respectively. Amounts equal to the salary and interest allowances were withdrawn by the members. a. Determine the division of income among the three members. Answert b. Prepare the journal entry to close the revenues, expenses, and withdrawals to the individual member equity accounts. c. Prepare a statement of members' equity for 20Y2. d. What are the advantages of an income-sharing agreement for the members of this LLC?

Answer 1

marvel media LLc has 3 partners:

WLKT Partners; madison Sanders; Observer Newspapers

Ratio= 4:3:3

thus Profit will be transferred in this Ratio among partners:

Profit given $ 360,000- 95000(amount calculated below point)= $265000

a)Division of income among Partners: all figures in $

WLKT Partners= 265000*4/10= 106000

madison Sanders= 265000*3/10= 79500

Observer Newspapers=265000*3/10=79500

Revenue and expenses are of Marvel media, LLC thus expenses and revenue enty will be single enrty pass out through Profit and Loss account of Partnership.

Revenue a/c                                       Dr.                             1,260,000

       To Profit and loss a/c                                                                          1,260,000

Profit and loss a/c                               Dr.                              900,000

       To Expenses                                                                                     900,000

Withdrawls Entry :

for firstly we have to calculate withdrawls amount then can pass the same entry.

b)Amount equal to salary and interest allowances are withdrawn by the members. given in question.

Particulars	WLKT Partners	madison Sanders	Observer Newspapers
Salary		55000
Interest on Capital	200000*10%= 20000	40000*10%= 4000	160000*10%= 16000
	20000	59000	16000.

WLKT Partners                                      20000

madison Sanders                                   59000

Observer Newspapers                             16000

               To Drawings                                               95000

c)STATEMENT OF MEMBER'S EQUITY:

Particulars	WLKT Partners	madison Sanders	Observer Newspapers
opening Balance	200000	40000	160000
additional capital inroduced on 1 june	50000
Interest On capital (as calculaed above)	20000	4000	16000
Salary		55000
Less: Drawings(as calculated above)	(20000)	(59000)	(16000)
Net balances	250,000	40,000	160,000

d) Advantages of Income Sharing Agreement:

in this case when there is an agreement then Members of LLC have divided profits in the ratio so there will be no conflict among the partners.