EX 12-14 Admitting a new LLC member with bonus

HealthSource, LLC, consists of two doctors, Drew and Moore, who share in all income and losses according to a 2:3 income-sharing ratio. Dr. Mann has been asked to join the LLC. Prior to admitting Mann, the assets of HealthSource were revalued to reflect their current market values. The revaluation resulted in medical equipment being increased by $35,000. Prior to the revaluation, the equity balances for Drew and Moore were $201,000 and $289,000, respectively.

a. Provide the journal entry for the asset revaluation.

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

1. Mann purchased a 30% interest in HealthSource, LLC, for $285,000.

2. Mann purchased a 25% interest in HealthSource, LLC, for $155,000.

Answer:

a. Medical Equipment........................................................ 35,000   Drew, Member Equity...............................................  14,0001   Moore, Member Equity.............................................  21,0002  1$35,000 × 2/5 = $14,000  2$35,000 × 3/5 = $21,000  
b. (1) Cash......................................................................... 285,000    Drew, Member Equity........................................  16,800    Moore, Member Equity......................................  25,200    Mann, Member Equity .......................................  243,000   Supporting calculations for the bonus:   Drew, Member Equity ($201,000 + $14,000).......... $215,000   Moore, Member Equity ($289,000 + $21,000)........  310,000   Contribution by Mann.............................................  285,000   Total equity after admitting Mann.......................... $810,000   Mann’s equity interest after admission................. × 30%   Mann, Member Equity............................................. $243,000   Contribution by Mann............................................. $285,000   Mann’s equity after admission ..............................  243,000   Bonus paid to Drew and Moore............................. $ 42,000  Drew: $42,000 × 2/5 = $16,800  Moore: $42,000 × 3/5 = $25,200  
 (2) Cash......................................................................... 155,000   Drew, Member Equity ............................................. 6,0001   Moore, Member Equity ........................................... 9,0002    Mann, Member Equity .......................................  170,000   1$15,000 × 2/5 = $6,000  2$15,000 × 3/5 = $9,000  
 Supporting calculations for the bonus:   Drew, Member Equity ............................................. $215,000   Moore, Member Equity ...........................................  310,000   Contribution by Mann.............................................  155,000   Total equity after admitting Mann.......................... $680,000   Mann’s equity interest after admission................. × 25%   Mann, Member Equity............................................. $170,000   Contribution by Mann.............................................  155,000   Bonus paid to Mann................................................ $ 15,000 

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