Marvel Media, LLC, has three members: WLKT Partners, Madison Sanders, and Observer Newspaper, LLC. On January 1, 20Y2, the three members had equity of $213,200, $36,000, and $159,200, respectively. WLKT Partners contributed an additional $49,100 to Marvel Media, LLC, on June 1, 20Y2. Madison Sanders received an annual salary allowance of $54,500 during 20Y2. The members equity accounts are also credited with 20% interest on each members January 1 capital balance. Any remaining income is to be shared in the ratio of 4:3:3 among the three members. members. The revenues, expenses, and net income for Marvel Media, LLC, for 20Y2 were $1,255,500, 872,400 and $383,100 respectively. Amounts equal to the salary and interest allowances were withdrawn by the members.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 20Y2.
D.	What are the advantages of an income-sharing agreement for the members of this LLC?

Chart of Accounts

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

	REVENUE
610	Revenues

	EXPENSES
510	Expenses
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

Schedule of Division of Income

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

Schedule of Division of Income

1		WLKT Partners	Madison Sanders	Observer Newspaper, LLC	Total
2	Salary allowance
3	Interest allowance
4	Remaining income (4:3:3)
5	Net income

Journal

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.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1		Closing Entries
2
3
4
5
6
7
8
9
10
11
12

Statement of Members Equity

C. Prepare a statement of members equity for 20Y2.

Marvel Media, LLC

Statement of Members Equity

For the Year Ended December 31, 20Y2

1		WLKT Partners	Madison Sanders	Observer Newspaper, LLC	Total
2	Balances, January 1, 20Y2
3	Capital additions
4
5	Net income for the year
6
7	Member withdrawals
8	Balances, December 31, 20Y2

Final Question

D. What are the advantages of an income-sharing agreement for the members of this LLC?

Without an income-sharing agreement, each member __________ be credited with an equal proportion of the total earnings, or one-third each. Separate contributions ___________ be acknowledged in the income-sharing formula.