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EX 12-7 Dividing LLC income Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that provided a salary allowance of $40,000 and $30,000 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. OBJ.2 a. Determine the division of $148,000 net income for the year. b. Provide journal entries to close the (1) revenues and expenses and (2) drawing accounts for the two members. c. If the net income was less than the sum of the salary allowances, how would income be divided between the two members of the LLC?

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EX 12-7 DIVIDING LLC INCOME A. Division of the total income is as follows FARLEY 4000 46800 86800 CLARK 30,000 31200 61200 SUMTOTAL 70,000 78,000 148000 S no Entries The salary allowances is The remaining income is The net income of the year is 2 B. Providing journal entries The Journal Entries are Accounttitle and explanation is Income summary account DR is To Malan Palace capital account is To Ashley Clark capital account is Debit Credit 148000 86800 61200 Revenue account DR is To expense account close the expense and income summary is) 668000 668000 Income summary account DR is 520000 To expense account close the expense and income summary is) 520000 4000 Martin farley capital account DR is Ashley Clark capital account Dr is to Martin Fowler withdrawal is to Ashley Clark withdrawal is to close withdrawal account is 30,000 40,000 30,000 C. For the all out pay of the LLC where not actually the total of the salary stipends the two people would even now be credited with their salary settlements from this entirety each partner would deduct his or a great deal of the excess of the total salary rewards over the general gain. thus, the qualification between the general gain and full scale salary settlements would be allowed to each partner as a finding, according to their compensation salary extent

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