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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

Statement of LLC liquidation

Lester, Torres, and Meant are members of Arcadia Sales, LLC, .sharing income and losses in the ratio of 2:2:1, respectively. 'The members decide to liquidate the limited liability company. The members' equity prior to liquidation and asset realization on August 1 are as follows:

Lester $ 49,000
Torres 61.000
Hearst 27,000
Total $137.000

In winding up operations during the month of August, noncash assets with a book value of $146,000 are sold for $158,000, and liabilities of $30,000 are satisfied. Prior to realization, Arcadia Sales has a cash balance of $26,000.

  1. a. Prepare a statement of LLC liquidation.
  2. b. Provide the journal entry for the final cash distribution to members.
  3. c. What is the role of the income- and loss-sharing ratio in liquidating an LLC?

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 prepare:  The statement of LLC liquidation

Explanation

Working Notes:

W.N-1

Calculation of division of realization Profit among partners:

The following table determines the realization profit.

 Sale price of Non cash asset (A)  $  158,000
Book value of Non cash asset (B)  $  146,000
Realization profit (A) – (B)  $  12,000

Table (2)

The profit and loss sharing ra...

b.

To determine

To record: The journal entry to distribute the cash among the partners.

c.

To determine

To explain: The role of the income and loss sharing ratio in liquidating an LLC.

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