Question

Dividing LLC Income
Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that provided a salary allowance of $63,000 and $50,000 to each member, respectively. In addition, the operating agreement specified an income-sharing ratio of 3:1. 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
$
$
$
Remaining income

 

Net income
$
$
$
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)

 

 

 

 

 

 

 

 

 

 

 

 

(2)

 

 

 

 

 

 

 

 

 

 

 


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?
If the net income of the LLC were less than the sum of the salary allowances,

members would still be credited with their salary allowances. The difference between the net income and total salary allowances would be allocated to each partner as

, according to the

ratio.

 

 



Expert Solution

Want to see the full answer?

Check out a sample Q&A here
Blurred answer
Students who’ve seen this question also like:
Financial Accounting
Financial Accounting
15th Edition
ISBN: 9781337272124
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
Not helpful? See similar books
Financial Accounting
Financial Accounting
Accounting For Partnerships And Limited Liability Companies. 7E
marketing sidebar icon
Want to see this answer and more?
Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*
*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: Dividing LLC Income Martin Farley and Ashley Clark formed a limited liability company with an…

A: The formula snip for distribution of net income is mentioned in step 1.

Q: Dividing LLC Income Martin Farley and Ashley Clark formed a limited liability company with an…

A: Hey there since you have posted multiple questions, we can solve the first question, please…

Q: Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that…

A: Click to see the answer

Q: Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that…

A: Introduction: Journal: Recording of a business transactions in a chronological order. First step in…

Q: Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that…

A: Requirement a:Determine the division of $148,000 net income between the partners.

Q: Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that…

A: The partnership is the agreement between two persons to start a business together and share income…

Q: Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that…

A: Partnership is an agreement between two or more than two persons which join hands, invest capital…

Q: Dividing LLC Income Instructions Chan of Accounts euinalFr Qestion Starting Quesien Instructions…

A: A. The division of net income of $148,000 is as below:

Q: A, B, and C are partners in an accounting firm. Their capita account balances at the year-end were A…

A: Calculation of Interest on Capital: Particulars Partner A Partner B Partner C Total Interest on…

Q: LLC Net Income and Statement of Members' Equity Marvel Media, LLC, has three members: WLKT Partners,…

A: The remaining income of $361,500 is obtained by subtracting a salary allowance of $208,800, the…

Q: Show the solution in good accounting form Nali contributed P24,000 and To contributed P48,000 to…

A: From the given information, Total Capital = P24000 + P48000 = P72000 In this case, Nali's and Toh's…

Q: A sole proprietor and an Individual with No business Form a Partnership On Apr. 8, 2020, T'olen tino…

A: On 08.04.2016, Tolentino who is sole proprietary and Tan decided to form a partnership  Profit…

Q: A, B and C are partners in an accounting firm.  Their capital account balances at year-end were: A,…

A: Correct option is. C. P19,400 Total profit share of partner C is : P19,400     A B C Total…

Q: Kevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan…

A: Click to see the answer

Q: 3. LJ and Fermin formed a joint venture. They agreed to share profit or loss in the ratio of 70% and…

A: Taxable income of LJ  Gross income.                      3000000 less: business expenses.…

Q: Kevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan…

A: Click to see the answer

Q: Kevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan…

A: Solution: Partner Particulars Basis FMV Kevan Cash 15,000 15,000   Land 120,000 140,000…

Q: firm. Their capital account balances at the year-end were A P120,000; B P140,000; C P80,000. They…

A: Total profit share of Partner C = Salary + Interest + Bonus = P6,000+ P8,000 +P10,909=P24,909

Q: Admitting a New LLC Member With Bonus Alert Medical, LLC, consists of two doctors, Abrams and…

A: Click to see the answer

Q: Rules for the Distribution of Profits or Losses Stephanie Calamba and Allan Brillantes decided to…

A: "Since you have posted a question with multiple sub parts, we will solve first three sub parts for…

Q: Admitting a New LLC Member With Bonus Alert Medical, LLC, consists of two doctors, Abrams and…

A: Particulars Debit Credit Medical equipment Revaluation reserve (Being asset revalue) 18,000…

Q: Admitting a New LLC Member With Bonus Alert Medical, LLC, consists of two doctors, Abrams and…

A: Revaluation of asset: Assets are generally revalued in partnership when a new partner is being…

Q: Accounting for Special Transactions - PARTNERSHIP OPERATIONS 1. Partners A and B share in profts…

A: "Since you have asked multiple questions, we will solve first question for you. If you want any…

Q: Miray Sinan and Partners Collective Company's 2019 profit is 200,000 TL. The company was established…

A: The partnership is a form of business organization under which two or more than two person joins…

Q: A, B, and C are partners in an accounting firm. Their capital account balances at the year-end were…

A: Total profit share of C = Bonus + Salary + Interest + Profit allocated to C    = 2,727.27 + 6,000 +…

Q: A, B, and C are partners in an accounting firm. Their capital account balances at the year-end were…

A: The distribution to partners is made through a profit or loss appropriation account. Particulars…

Q: A, B, and C are partners in an accounting firm. Their capital account balances at the year-end were…

A: Interest on capital of A = (120,000 - 100,000) x 10% = P2,000 Interest on capital of B = (140,000 -…

Q: A, B, and C are partners in an accounting firm. Their capital account balances at the year- end were…

A: Profit shares are calculated after allowing all the expenditure and all the distributions made to…

Q: Kevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan…

A: Following is the tax basis balance sheet for all partners:

Q: On July 1, 2020, Wency and William agreed to form a partnership from their respective proprietorship…

A: At the time of formation of partnership, partners can contribute cash or non cash assets for the…

Q: 30 - 2019 profit of Alper Sinan and Partners Collective is 100,000 TL. The company was established…

A: Partnership is an agreement between two or more persons in which they invest capital, run business…

Q: Refozar, Martinez and Magsino förmed a parthership. The profit-sharing arrangements are as follows:…

A: Partnership business means where two or more person comes together to  do the business and share the…

Q: Kevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan…

A: Answer:  Partner Particulars Basis FMV Loss Gain Kevan Cash 15,000 15,000 0 0   Land 120,000…

Q: Kevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan…

A: Answer: Tax basis is the partnership's inside basis in the individual assets. Albee LLC's tax basis…

Q: 1. Say, Alittle and Prayer are partners in a furniture company. Their partnership agreement provides…

A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: AAA, BBB, and CCC are partners sharing profits and losses in the ratio of 5:3:2. During the year…

A: Partnership means where two or more person comes together to do some common business activity and…

Q: AAA, BBB, and CCC are partners sharing profits and losses in the ratio of 5:3:2. During the year…

A: A realization account is prepared to set off the liabilities and sold assets of the company and…

Q: AAA, BBB, and CCC are partners sharing profits and losses in the ratio of 5:3:2. During the year…

A: Total Capital= AAA + BBB + CCC =P200,000 + P175,000 + P375,000 =P750,000

Q: AAA, BBB, and CCC are partners sharing profits and losses in the ratio of 5:3:2. During the year…

A: This question is based on partnership. AAA, BBB, and CCC are partners Profit-sharing ratio= 5:3:2…

Q: AAA, BBB, and CCC are partners sharing profits and losses in the ratio of 5:3:2. During the year…

A: Partnership means where two or more person comes together to do some common business activity and…

Q: Kevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan…

A: K’s contributed through the cash $15,000 and through immovable assets (land) $120,000. Total…

Q: Pearson andMurphy have partner capital balances, at book value, of $45,000 and $65,000 as of…

A: Since partners believe that tangible net assets have a market value in excess of book value in the…

Q: The Income Statement of a partnership firm shows Net Income of OMR 75,000. A partner has provided…

A: In a partnership, two or more parties agree to operate and manage a business and share the profits…

Q: A and B's partnership agreement provided for annual salary allowances of P160,000 for  and P80,000…

A: A B Total Net Income (Loss)     P2,00,000 Salary allowance:                 A P1,60,000…

Q: split profits and losses according to a 40/60 ratio. Additionally, the partnership will provide…

A: Given:

Q: On October 1, A and B pooled their assets to form a Partnership, with the firm to take over the…

A: Bonus Approach of a Partnership firm: The difference between the amount invested in the partnership…

Q: On October 1, A and B pooled their assets to form a Partnership, with the firm to take over the…

A: As we know Capital =Assets - Liabilities

Q: On October 1, A and B pooled their assets to form a Partnership, with the firm to take over the…

A: When a new partner adds goodwill or another intangible asset to a partnership, the bonus technique…

Q: On October 1, A and B pooled their assets to form a Partnership, with the firm to take over the…

A: Bonus method is applied in the event of admission of a partner or formation of a new partnership.…

Q: On October 1, A and B pooled their assets to form a Partnership, with the firm to take over the…

A: Partnership means where two or more person comes together to do some common business activity and…

Knowledge Booster
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
  • Financial Accounting
    Accounting
    ISBN:9781337272124
    Author:Carl Warren, James M. Reeve, Jonathan Duchac
    Publisher:Cengage Learning
    Financial Accounting
    Accounting
    ISBN:9781305088436
    Author:Carl Warren, Jim Reeve, Jonathan Duchac
    Publisher:Cengage Learning
    College Accounting, Chapters 1-27
    Accounting
    ISBN:9781337794756
    Author:HEINTZ, James A.
    Publisher:Cengage Learning,
  • SWFT Essntl Tax Individ/Bus Entities 2020
    Accounting
    ISBN:9780357391266
    Author:Nellen
    Publisher:Cengage
    SWFT Comprehensive Vol 2020
    Accounting
    ISBN:9780357391723
    Author:Maloney
    Publisher:Cengage
    SWFT Comprehensive Volume 2019
    Accounting
    ISBN:9780357233306
    Author:Maloney
    Publisher:Cengage
  • Financial Accounting
    Accounting
    ISBN:9781337272124
    Author:Carl Warren, James M. Reeve, Jonathan Duchac
    Publisher:Cengage Learning
    Financial Accounting
    Accounting
    ISBN:9781305088436
    Author:Carl Warren, Jim Reeve, Jonathan Duchac
    Publisher:Cengage Learning
    College Accounting, Chapters 1-27
    Accounting
    ISBN:9781337794756
    Author:HEINTZ, James A.
    Publisher:Cengage Learning,
    SWFT Essntl Tax Individ/Bus Entities 2020
    Accounting
    ISBN:9780357391266
    Author:Nellen
    Publisher:Cengage
    SWFT Comprehensive Vol 2020
    Accounting
    ISBN:9780357391723
    Author:Maloney
    Publisher:Cengage
    SWFT Comprehensive Volume 2019
    Accounting
    ISBN:9780357233306
    Author:Maloney
    Publisher:Cengage