Question

Alert Medical, LLC, consists of two doctors, Abrams and Lipscomb, who share in all income and losses according to a 2:3 income-sharing ratio. Dr. Lin has been asked to join the LLC. Prior to admitting Lin, the assets of Alert Medical were revalued to reflect their current market values. The revaluation resulted in medical equipment being increased by $37,000. Prior to the revaluation, the equity balances for Abrams and Lipscomb were $355,000 and $407,000, respectively.

Provide the journal entry for the bonus under the following independent situations:

1. Lin purchased a 30% interest in Alert Medical, LLC, for $455,000. For a compound transaction, if an amount box does not require an entry, leave it blank.

	Cash
	Abrams, Member Equity
	Lipscomb, Member Equity
	Lin, Member Equity

2. Lin purchased a 25% interest in Alert Medical, LLC, for $232,000. For a compound transaction, if an amount box does not require an entry, leave it blank.

	Cash
	Abrams, Member Equity
	Lipscomb, Member Equity
	Lin, Member Equity

Answer 1

Entry for Revaluation of equipment:-
Account Titles	Debit	Credit
Equipment	37,000
Revaluation Reserve		37,000
Entry for distribution of Revaluation reserve to old partners :-
Account Titles	Debit	Credit
Revaluation Reserve	37,000
Abrams, Member Equity		14,800
Lipscomb, Member Equity		22,200

1.)	Lin purchased a 30% interest in Alert Medical, LLC, for $455,000
	Account Titles	Debit	Credit
	Cash	455,000
	Abrams, Member Equity		31,520
	Lipscomb, Member Equity		47,280
	Lin, Member Equity		376,200
	Equity of Alert Medical ,LLC before admission of Lin	799,000	(355,000 + 407,000 + 14,800 + 22,200)
	Add: Lin amount of Investment	455,000
	Total Equity after Lin Admission	1,254,000
	Lin share of interest in LLC ( 30% )	376,200	(1,254,000 x 30%)
	Bonus to existing partners	78,800	( 455,000 - 376,200 )
	Abrams share of Bonus	31,520	( 78,800 x 2 ) / 5
	Lipscomb share of Bonus	47,280	( 78,800 x 3 ) / 5
2.)	Lin purchased a 25% interest in Alert Medical, LLC, for $232,000
	Account Titles	Debit	Credit
	Cash	232,000
	Abrams, Member Equity	10,300
	Lipscomb, Member Equity	15,450
	Lin, Member Equity		257,750
	Equity of Alert Medical ,LLC before admission of Lin	799,000	(355,000 + 407,000 + 14,800 + 22,200)
	Add: Lin amount of Investment	232,000
	Total Equity after Lin Admission	1,031,000
	Lin share of interest in LLC ( 25% )	257,750	(1,031,000 x 25% )
	Bonus to New Partner	25,750	(257,750 - 232,000 )
	Abrams share of contribution to Bonus	10,300	( 25,750 x 2 ) / 5
	Lipscomb share of contribution to Bonus	15,450	( 25,750 x 3 ) / 5