Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that provided a salary allowance of $36,500 and $30,300 to each member, respectively. In addition, the operating agreement specified an income-sharing ratio of 3:1. The two members withdrew amounts equal to their salary allowances. Revenues were $668,000 and expenses were $520,000, for a net income of $148,000.

Note: The reduction in members equity from withdrawals would be disclosed on the statement of members equity.

	Required:
A.	Determine the division of $148,000 net income for the year.
B.	On December 31, provide journal entries to close the (1) revenues and expenses and (2) drawing accounts for the two members. Refer to the Chart of Accounts for exact wording of account titles.
C.	If the net income was less than the sum of the salary allowances, how would income be divided between the two members of the LLC?

Journal

A. Determine the division of $148,000 net income for the year.

	Farley	Clark	Total
Salary allowance
Remaining income
Net income

B. On December 31, provide journal entries to close the (1) revenues and expenses and (2) drawing accounts for the two members. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

ACCOUNTING EQUATION

Score: 37/99

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1		Closing Entries
2	Text entry invalid
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