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Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124
Textbook Problem

Statement of LLC liquidation

Lester, Torres, and Hearst 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:

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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 $35,000 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

Prepare the statement of LLC liquidation

Explanation

Working note 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 ratio among partner...

b.

To determine

Record journal entry to distribute the cash among the partners.

c.

To determine

Explain role of the income and loss sharing ratio in liquidating an LLC.

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