Marvel Media, LLC, has three members: WLKT Partners, MadisonSanders, and Observer Newspaper, LLC. On January 1, 20Y2, the threemembers had equity of $240,000, $60,000, and $145,000,respectively. WLKT Partners contributed an additional $60,000 toMarvel, Media, LLC, on June 1, 20Y2. Madison Sanders received anannual salary allowance of $139,200 during 20Y2. The members’equity accounts are also credited with 12% interest on eachmember's January 1 capital balance. Any remaining income is to beshared in the ratio of 4:3:3 among the three members. The revenues,expenses, and net income for Marvel Media, LLC, for 20Y2 were$909,661, $549,661 and $360,000 respectively. Amounts equal to thesalary and interest allowances were withdrawn by the members.
a. Determine the division of income among thethree members. If an amount box does not require an entry, leave itblank.
WLKT MADIS OBS 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 equityaccounts. For a compound entry, if an amount box does not requirean entry, leave it blank.
| (1) | | | |
_________ ____ ____ _________ ____ ____ _________ ____ ____ | | | |
| _________ ____ ____ | | | |
| _________ ____ ____ | | | |
| _________ ____ ____ | | | |
| (2) | | | |
| ________ ____ ____ | | | |
| ________ ____ ____ | | | |
| ________ ____ ____ | | | |
| ________ ____ ____ | | | |
| ________ ____ ____ | | | |
________ _____ _____
c. Prepare a statement of members' equity for20Y2. If an amount box does not require an entry, leave itblank.
| Marvel Media, LLC |
| Statement of Members' Equity |
| Forthe 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 | $ | $ | $ | $ |
d What are the advantages of an income-sharingagreement for the members of this LLC?
Without an income-sharing agreement, each member (WOULD/WOULDNOT) be credited with an equal proportion of the total earnings, orone-third each. Separate contributions (CAN/CANNOT) be acknowledgedin the income-sharing formula.
