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 $154,000 and $208,000, respectively.

a. Provide the journal entry for the asset revaluation. For a compound transaction, if an amount box does not require an entry, leave it blank.

	Medical Equipment
	Abrams, Member Equity
	Lipscomb, Member Equity

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

1. Lin purchased a 30% interest in Alert Medical, LLC, for $228,000. For a compound transaction, if an amount box does not require an entry, leave it blank.

	Abrams, Member Equity

2. Lin purchased a 25% interest in Alert Medical, LLC, for $124,000. For a compound transaction, if an amount box does not require an entry, leave it blank.

Answer 1

Date	General Journal	Debit	Credit
a	Medical Equipment	40000
	Abrams, Member Equity 40000/5*2		16000
	Lipscomb, Member Equity 40000/5*3		24000
b
1	Cash	228000
	Abrams, Member Equity 39000/5*2		15600
	Lipscomb, Member Equity 39000/5*3		23400
	Lin, Member Equity		189000
2	Cash	124000
	Abrams, Member Equity 77500/5*2	3000
	Lipscomb, Member Equity 7500/5*3	4500
	Lin, Member Equity		131500

Explanation:

1	Abrams, members equity (154000+16000)	170000
	Lipcomb,Member equity (208000+24000)	232000
	Contribution Margin by Lin	228000
	Total Equity after admitting Lin	630000
	Lin's Equity Interest after admisson 630000*30%	189000
	Lin member equity	228000
	Lin's Equity Interest after admisson 630000*30%	189000
	Bonus paid to abrams,lipscomp	39000
2	Abrams, members equity (154000+16000)	170000
	Lipcomb,Member equity (208000+24000)	232000
	Contribution Margin by Lin	124000
	Total Equity after admitting Lin	526000
	Lin's Equity Interest after admisson 526000*25%	131500
	Lin member equity	131500
	contribution by Lin member equity	124000
	Bonus paid to abrams,lipscomp	7500