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: Lester $53,120 Torres 55,790 Hearst 26,560 Total $135,470 In winding up operations during the month of August, noncash assets with a book value of $157,550 are sold for $170,590, and liabilities of $47,430 are satisfied. Prior to realization, Arcadia Sales has a cash balance of $25,350. Required: a. Prepare a statement of LLC liquidation. Refer to the list of Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter negative numbers (balance deficiencies, payments, cash distributions, divisions of loss), use a minus sign. If there is no amount to be reported for sale of assets, payment of liabilities, receipt of deficiency, or cash distribution rows, the cell can be left blank. However, in the balance rows, a balance of zero MUST be indicated by entering "0". b. Provide the journal entry for the final cash distribution to members on August 31. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. c. What is the role of the income- and loss-sharing ratio in liquidating an LLC?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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:


Lester	$53,120
Torres	55,790
Hearst	26,560
Total	$135,470

In winding up operations during the month of August, noncash assets with a book value of $157,550 are sold for $170,590, and liabilities of $47,430 are satisfied. Prior to realization, Arcadia Sales has a cash balance of $25,350.

Required:

a.	Prepare a statement of LLC liquidation. Refer to the list of Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter negative numbers (balance deficiencies, payments, cash distributions, divisions of loss), use a minus sign. If there is no amount to be reported for sale of assets, payment of liabilities, receipt of deficiency, or cash distribution rows, the cell can be left blank. However, in the balance rows, a balance of zero MUST be indicated by entering "0".
b.	Provide the journal entry for the final cash distribution to members on August 31. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
c.	What is the role of the income- and loss-sharing ratio in liquidating an LLC?

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