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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Admitting a new LLC member with bonus

Alert Medical, LLC, consists of two doctors, Abrams and Lipscomb, who share in all income and losses according to a 2:3 income-sharing ratio. Dr. Lin has been asked to join the LLC. Prior to admitting Lin, the assets of Alert Medical were revalued to reflect their current market values. The revaluation resulted in medical equipment being increased by $40,000. Prior to the revaluation, the equity balances for Abrams and Lipscomb were $154,000 and $208,000, respectively.

  1. a. Provide the journal entry for the asset revaluation.
  2. b. Provide the journal entry for the bonus under the following independent situations:
    1. 1. Lin purchased a 30% interest in Alert Medical, LLC, for $228,000.
    2. 2. Lin purchased a 25% interest in Alert Medical, LLC, for $124,000.

a.

To determine

Limited Liability Company

It is that form of organization which is formed as a legal entity that provides limited liability to the owners. It has a common seal.

To record:  The journal entry for the asset revaluation.

Explanation

Working Note:

Calculation of share of partners in the revaluation profit

Revaluation Profit = $40,000
Profit sharing ratio = 2:3

Share of A = $40,000 × 25=$16,000

b. 1

To determine

To provide: The journal entry

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