InstructionsMartin Farley and Ashley Clark formed a limited liability company with an operating agreement that provided a salary allowance of $36,500 and $30,300 to each member, respectively. In addition, the operating agreement specified anincome-sharing ratio of 3:1. The two members withdrew amounts equal to their salary allowances. Revenues were $668,000 and expenses were $520,000, for a net income of $148,000.Note: The reduction in members' equity from withdrawals would be disclosed on the statement of members' equity.a. Determine the division of $148,000 net income for the year.b. On December 31, provide journal entries to close the (1) revenues and expenses and (2) drawing accounts for the two members.c. If the net income was less than the sum of the salary allowances, how would income be divided between the two members of the LLC?First Questiona. Determine the division of $148,000 net income for the year.Salary allowance $Remaining incomeNet income$Farley$$Clark$$TotalGeneral Journalb. On December 31, provide journal entries to close the (1) revenues and expenses and (2) drawing accounts for the two members.General Journal InstructionsFinal Questionc. If the net income was less than the sum of the salary allowances, howwould income be divided between the two members of the LLC?If the net income of the LLC was less than the sum of the salary allowances,both members would still bewith their salary allowances.From this amount, each partner wouldhis or her share of theexcess of the total salary allowance over the net income. Thus, thedifference between the net income and total salary allowances would beallocated to each partner as aaccording to the income-sharing ratio.

It is an agreement between two or more parties to conduct the business and share the profits and…

Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that provided a salary allowance of $36,500 and $30,300 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. Revenues were $668,000 and expenses were $520,000, for a net income of $148,000.

Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that provided a salary allowance of $36,500 and $30,300 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. Revenues were $668,000 and expenses were $520,000, for a net income of $148,000.

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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