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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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Chapter
Section
BuyFindarrow_forward

Accounting

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

Statement of members' equity, admitting new member

The statement of members’ equity for Bonanza, LLC, follows:

images

  1. a. What was the income-sharing ratio in 20Y3?
  2. b. What was the income-sharing ratio in 20Y4?
  3. c. How much cash did Thomas Dunn contribute to Bonanza, LLC, for his interest?
  4. d. Why do the member equity accounts of Idaho Properties, LLC, and Silver Streams, LLC, have positive entries for Thomas Dunn's contribution?
  5. e. What percentage interest of Bonanza did Thomas Dunn acquire?
  6. f. Why are withdrawals less than net income?

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.

 The income sharing ratio in 20Y3.

Explanation

The income sharing ratio is the ratio in which the members share the income earned from LLC. The income sharing ratio is determined by dividing the income received by each member of LLC by the total income of LLC.

The calculation of income sharing ratio between Member IP and SS in the year 20Y3 is as follows:

IncomeSharingRatioofMemberIP}=$57,000$190,000×100

b.

To determine

 The income sharing ratio in 20Y4.

c.

To determine

 The amount paid by the Member TD to the LLC for his interest.

d.

To determine

To explain:  The reason why Member IP and SS account shows positive entries for TD’s contribution?

e.

To determine

 The portion of LLC acquired by Member TD.

(f)

To determine

To explain:  The reason of less withdrawal than the net income.

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