LLC net income and statement of members' equity Interactive Media, LLC, has three members: VC Partners, Colin Campella, and Active Graphics, LLC. On January 1, 20Y2, the three members had equity of $210,000, $55,000, and $125,000, respectively. VC Partners contributed an additional $50,000 to Interactive Media, LLC, on June 1, 20Y2. Colin Campella receiv annual salary allowance of $121,800 during 2012. 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 Interactive Media, LL 2012 were $958,254, $648,254 and $310,000, 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 Amounts equal to the salary and interest allowances were withdrawn by the members.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. Line Item Description VC Partners Colin Campella Active Graphics, LLC Total Salary allowance Interest allowance Remaining income (4:3:3) Net income Schedule of Division of Income b. Journalize the entry to close the revenues and expenses to the member equity accounts. If an amount box does not require an entry, leave it blank. c. Journalize the closing journal entry for the member withdrawals of salary and interest. If an amount box does not require an entry, leave it blank. (2) d. Prepare a statement of members' equity for 20Y2. If an amount box does not require an entry, leave it blank. For amounts that should be subtracted, enter the amount with a minus sign. Interactive Media, LLC Statement of Members' Equity For the Year Ended December 31, 2012 VC Partners Colin Campella Active Graphics, LLC Total Line Item Description Balances, January 1, 2012 Investment by member Net income for the year Member withdrawals Balances, December 31, 2012 e 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.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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