Question

Marvel Media, LLC, has three members: WLKT Partners, Madison Sanders, and Observer Newspaper, LLC. On January 1, 2016, the three members had equity of $200,000, $40,000, and $160,000, respectively. WLKT Partners contributed an additional $50,000 to Marvel Media, LLC, on June 1, 2016. Madison Sanders received an annual salary allowance of $55,000 during 2016. The members’ equity accounts are also credited with 10% 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 net income for Marvel Media, LLC, for 2016 was $360,000. Amounts equal to the salary and interest allowances were withdrawn by the members.

	Required:
A.	Determine the division of income among the three members.
B.	Prepare the journal entries to close the net income and withdrawals to the individual member equity accounts. Refer to the Chart of Accounts for exact wording of account titles.
C.	Prepare a statement of members’ equity for 2016.

CHART OF ACCOUNTS
Marvel Media, LLC
General Ledger
ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 113 Allowance for Doubtful Accounts 114 Interest Receivable 115 Notes Receivable 116 Inventory 117 Office Supplies 118 Store Supplies 119 Prepaid Insurance 120 Land 123 Equipment 124 Accumulated Depreciation-Equipment 129 Asset Revaluations 133 Patent LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Madison Sanders, Member Equity 311 Madison Sanders, Drawing 312 Observer Newspaper, LLC, Member Equity 313 Observer Newspaper, LLC, Drawing 314 WLKT Partners, Member Equity 315 WLKT Partners, Drawing 330 Income Summary	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 520 Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Equipment 523 Delivery Expense 524 Repairs Expense 529 Selling Expenses 531 Rent Expense 533 Insurance Expense 534 Office Supplies Expense 535 Store Supplies Expense 536 Credit Card Expense 537 Cash Short and Over 538 Bad Debt Expense 539 Miscellaneous Expense 710 Interest Expense

Answer 1

a. Determine the division of income among the three members.

Net income	$   360,000.00
Ratio	4.3.3
	Weight	Share
WLKT partners	4	$144,000.00
madison	3	$108,000.00
Observer	3	$108,000.00
Total	10	$360,000.00

b. Prepare the journal entry to close the revenues, expenses, and withdrawals to the individual's member equity accounts.

No.	Accounts	Debit	Credit
1)	Revenues A/c Dr	$1,260,000.00
	To Profit and Loss A/c		$ 1,260,000.00
2)	Profit and Loss DR	$   900,000.00
	TO Expenses		$    900,000.00
3)	WLKT partners	$      20,000.00
	Madison sanders	$        4,000.00
	Madison sanders	$      55,000.00
	Observer newspaper	$      16,000.00
	To Bank		$       95,000.00

( interest @ 10% on opening capital withdrawn by partners, and Madison also withdrawn salary )

c. Prepare a statement of members' equity for 2016.

Particulars	WLKT	Madison	Observer	Total
Opening	$     200,000	$      40,000	$ 160,000	$ 400,000
Add Interest	$       20,000	$        4,000	$   16,000
Add salary	$                 -	$      55,000	$             -
Less withdrwan	$       20,000	$      59,000	$   16,000
Add Profit	$     144,000	$    108,000	$ 108,000	$ 360,000
Closing Equity	$     344,000	$    148,000	$ 268,000