Martin Farley and Ashley Clark formed a limited liability company with an operat

Question

Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that provided a salary allowance of $36,400 and $28,100 to each member, respectively. In addition, the operating agreement specified an income-sharing ratio of 3:1. The two members withdrew amounts equal to their salary allowances. The reduction in members' equity from withdrawals would be disclosed on the statement of members' equity. Determine the division of $149,400 net income for the year. On December 31, provide journal entries to close the (1) income summary and (2) drawing accounts for the two members. Refer to the Chart of Accounts for exact wording of account titles. If the net income were less than the sum of the salary

Explanation / Answer

1)

B)

3)If Income is less than total salary ,The loss is distributable to partners only up to the capital account balances .Any excess loss is not distributed .

Martin Ashley Net income   [149400] Less:salary paid [64500] 36400 28100 Remaining Income left [84900]in3:1 63675    [84900*3/4] 21225    [84900*1/4] Total income 100075 49325

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