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 $40,000. Prior to the revaluation, the equity balances for Abrams and Lipscomb were $164,800 and $223,800, respectively.

	Required:
A.	On December 31, provide the journal entry for the asset revaluation. Refer to the Chart of Accounts for exact wording of account titles.
B.	On December 31, provide the journal entry for the bonus under the following independent situations (refer to the Chart of Accounts for exact wording of account titles): 1. Lin purchased a 30% interest in Alert Medical, LLC, for $219,400. 2. Lin purchased a 25% interest in Alert Medical, LLC, for $114,400.

Answer 1

a.	Medical Equipment	$           40,000
	Abrams, Member Equity ($40000*2/5)		$           16,000
	Lipscomb, Member Equity ($40000*3/5)		$           24,000
b.
1	Cash	$       2,19,400
	Abrams, Member Equity ($25000*2/5)		$           10,000
	Lipscomb, Member Equity ($25000*3/5)		$           15,000
	Lin, Member Equity		$       1,94,400
	Calculation of Bonus
	Abrams, Member Equity($1,64,800+$16,000)		$       1,80,800
	Lipscomb, Member Equity($2,23,800+$24,000)		$       2,47,800
	Contribution by Lin		$       2,19,400
	Total Equity after admitting Lin		$       6,48,000
	Lin's Equity interest after admission		30%
	Lin, Member Equity		$       1,94,400
	Contribution by Lin		$       2,19,400
	Lin's Equity interest after admission		$       1,94,400
	Bonus Paid to Abros and Lipscomb		$           25,000
2	Cash	$       1,14,400
	Abrams, Member Equity ($21350*2/5)	$             8,540
	Lipscomb, Member Equity ($21350*3/5)	$           12,810
	Lin, Member Equity		$       1,35,750
	Calculation of Bonus
	Abrams, Member Equity($1,64,800+$16,000)		$       1,80,800
	Lipscomb, Member Equity($2,23,800+$24,000)		$       2,47,800
	Contribution by Lin		$       1,14,400
	Total Equity after admitting Lin		$       5,43,000
	Lin's Equity interest after admission		25%
	Lin, Member Equity		$       1,35,750
	Lin's Equity interest after admission		$       1,35,750
	Contribution by Lin		$       1,14,400
	Bonus Paid to Lin		$           21,350