LLC Net Income and Statement of Members\' Equity Marvel Media, LLC, has three me

Question

LLC Net Income and Statement of Members' Equity

Marvel Media, LLC, has three members: WLKT Partners, Madison Sanders, and Observer Newspaper, LLC. On January 1, 20Y2, the three members had equity of $320,000, $80,000, and $190,000, respectively. WLKT Partners contributed an additional $80,000 to Marvel, Media, LLC, on June 1, 20Y2. Madison Sanders received an annual salary allowance of $185,600 during 20Y2. The members’ equity accounts are also credited with 15% interest on each member's January 1 capital balance. Any remaining income is to be shared in the ratio of 4:3:3 among the three members. The revenues, expenses, and net income for Marvel Media, LLC, for 20Y2 were $1,399,663, $859,663 and $540,000 respectively. Amounts equal to the salary and interest allowances were withdrawn by the members.

a. Determine the division of income among the three members. If an amount box does not require an entry, leave it blank.

b. Prepare the journal entries to close the (1) net income and (2) withdrawals to the individual member equity accounts. For a compound entry, if an amount box does not require an entry, leave it blank.

___________

___________

c. Prepare a statement of members' equity for 20Y2. If an amount box does not require an entry, leave it blank.

d What are the advantages of an income-sharing agreement for the members of this LLC?

Without an income-sharing agreement, each member _____ be credited with an equal proportion of the total earnings, or one-third each. Separate contributions _____ be acknowledged in the income-sharing formula.

Please show working,step by step

Schedule of Division of Income WLKT Partners Madison Sanders Observer Newspaper, LLC Total Salary allowance $ $ Interest allowance $ $ Remaining income (4:3:3) Net income $ $ $ $

Explanation / Answer

Solution a:

Solution b:

Solution c:

Solution d:

The main advantage of income sharing agreement is that there is clear identification how the income will be shared in members of LLC and it will end dispute between the members. Without an income sharing agreement, each member capital will be credited with an equal proportion of the total earnings or one third each. Separate contributions shall not be acknowledged in the income sharing formula without income sharing agreement.

Schedule of Divison of income Particulars WLKT Partners Madison Senders Observer Newspaper LLC Total Salary Allowance $185,600.00 $185,600.00 Interest Allowance
WLKT - ($320000*15%)
Madison - ($80,000*15%)
Observer - ($190,000*15%) $48,000.00 $12,000.00 $28,500.00 $88,500.00 Remaining Income ($540,000 - $185,600 - $88,500 = $265,900)
WLKT ($265,900*4/10)
Madison ($265,900*3/10)
Observer ($265,900*3/10) $106,360.00 $79,770.00 $79,770.00 $265,900.00 Net Income $154,360.00 $277,370.00 $108,270.00 $540,000.00

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