Question

Statement of Members' Equity, Admitting New Member

The statement of members’ equity for Bonanza, LLC, follows:

Bonanza, LLC
Statement of Members' Equity
For the Years Ended December 31, 20Y3 and 20Y4
	Idaho      Properties,      LLC,      Member      Equity		Silver      Streams,      LLC,      Member      Equity		Thomas      Dunn,      Member      Equity		Total      Members'      Equity
Members' equity, January 1, 20Y3	$1,048,000		$682,000				$1,730,000
Net income	171,000		399,000				570,000
Members' equity, December 31, 20Y3	$1,219,000		$1,081,000				$2,300,000
Dunn contribution, January 1, 20Y4	10,560		24,640		$444,800		480,000
Net income	243,000		162,000		405,000		810,000
Member withdrawals	(87,500)		(34,000)		(149,900)		(271,400)
Members' equity, December 31, 20Y4	$1,385,060		$1,233,640		$699,900		$3,318,600

a. What was the income-sharing ratio in 20Y3? Enter the percentage per member and then select the ratio.

Idaho Properties, LLC	%
Silver Streams, LLC	%
Ratio

b. What was the income-sharing ratio in 20Y4? Enter the percentage per member and then select the ratio.

Idaho Properties, LLC	%
Silver Streams, LLC	%
Thomas Dunn	%
Ratio

c. How much cash did Thomas Dunn contribute to Bonanza, LLC, for his interest?
$

d. Why do the member equity accounts of Idaho Properties, LLC, and Silver Streams, LLC, have positive entries for Thomas Dunn’s contribution?
The positive entries to Idaho Properties and Silver Streams are the result of Thomas Dunn.

e. What percentage interest of Bonanza did Thomas Dunn acquire?
%

f. Why are withdrawals less than net income?
Withdrawals will be less when the members wish to capital in the business to business growth.

Answer 1

Answer a.
Income Sharing Ratio - 20Y3
Idaho Properties, LLC = $171,000 / $570,000 = 30%
Silver Streams, LLC = $399,000 / $570,000 = 70%
Ratio = 3:7
Answer b.
Income Sharing Ratio - 20Y4
Idaho Properties, LLC = $243,000 / $810,000 = 30%
Silver Streams, LLC = $162,000 / $810,000 = 20%
Thomas Dunn = $405,000 / $810,000 = 50%
Ratio = 3:2:5
Answer c.
Thomas Dunn contribution = $480,000 ($444, 800 + ($10,560 + $24,640) (Bonus Paid to partners))
Answer d.
The positive entries to Idaho Properties and Silver Streams are the result of bonus paid by Thomas Dunn.
Answer e.
Idaho Properties, LLC, Equity	1,229,560.00
Silver Streams, LLC, Equity	1,105,640.00
Thomas Dunn, Equity	444,800.00
Total	2,780,000.00
Thomas Ownership Interest after admission = $444,800 / $2,780,000
Thomas Ownership Interest after admission = 16%
Answer f.
Withdrawals will be less when the members wish to retain capital in the business to support business growth or otherwise strengthen the business.