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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 530,000 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. 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. 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?

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 12, Problem 12.7EX
Textbook Problem

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 530,000 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.

  1. a. Determine the division of $148,000 net income for the year.
  2. b. Provide journal entries to close the (1) revenues and expenses and (2) drawing accounts for the two members.

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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Chapter 12 Solutions

Accounting
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