Tyler Hawes and Piper Albright formed a partnership, investing $288,000 and $192,000, respectively. Determine their participation in the year's net income of $390,000 under each of the following independent assumptions:
a) No agreement concerning division of net income.
b) Divided in the ratio of original capital investment.
Interest at the rate of 15% allowed on original investments and the remainder divided in the ratio of 2:3.
Salary allowances of $76,000 and $104,000, respectively, and the balance divided equally.
Marvel Media, LLC, has three members: WLKT Partners, Madison Sanders, and Observer Newspaper, LLC.
On January 1, 20Y2, the three members had equity of $155,000, $40,000, and $95,000, respectively.
WLKT Partners contributed an additional $40,000 to Marvel, Media, LLC, on June 1, 20Y2.
Madison Sanders received an annual salary allowance of $89,900 during 20Y2.
The members' equity accounts are also credited with 12% 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 $306,257, $76,257 and $230,000 respectively.
Amounts equal to the salary and interest allowances were withdrawn by the members.
Required:
a. Determine the division of income among the three members.
Schedule of Division of Income
WLKT Partners Madison Sanders Observer Newspaper, LLC Total
Salary allowance
Interest allowance
Remaining income (4:3:3)
Net income
b. Prepare the journal entries to close the (1) net income and (2) withdrawals to the individual member equity accounts.
(1)
Revenues
Expenses
WLKT Partners, Member Equity
Madison Sanders, Member Equity
Observer Newspaper, LLC, Member Equity
(2)
WLKT Partners, Member Equity
Madison Sanders, Member Equity
Observer Newspaper, LLC, Member Equity
WLKT Partners, Drawing
Madison Sanders, Drawing
Observer Newspaper, LLC, Drawing
c. Prepare a statement of members' equity for 20Y2.
Marvel Media, LLC
Statement of Members' Equity
For the Year Ended December 31, 20Y2
WLKT Partners Madison Sanders Observer Newspaper, LLC Total
Balances, January 1, 20Y2 $ $ $ $
Capital additions $ $ $ $
Net income for the year $ $ $ $
Member withdrawals $ $ $ $
Balances, December 31, 20Y2 $ $ $ $