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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

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?

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 division of $148,000 net income between the partners.

Explanation

The division of $148,000 net income between the partners.

F C Total
Salary allowance…………… $40,000 $30,000 $...

b. 1

To determine

To provide: The journal entries to close the revenues and expenses for the two members.

c.

To determine

To explain: If the net income was less than the sum of salary allowance, how would income is divided between two members?

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