EX 12-18 Statement of members’ equity, admitting new member
The statement of members’ equity for Bonanza, LLC, is shown below.
Bonanza, LLC Statement of Members’ Equity For the Years Ended December 31, 2012 and 2013 Idaho Properties, LLC, Member Equity Silver Holdings, LLC, Member Equity
Justin Thomas Member Equity
Total Members’ Equity Members’ equity, December 31, 2011 $552,000 $420,500 $ 972,500 Net income 128,000 192,000 320,000 Members’ equity, December 31, 2012 $680,000 $612,500 $1,292,500 Thomas contribution, January 1, 2013 8,000 12,000 $250,000 270,000 Net income 90,000 225,000 135,000 450,000 Less member withdrawals (32,000) (48,000) (50,000) (130,000) Members’ equity, December 31, 2013 $746,000 $801,500 $335,000 $1,882,500
a. What was the income-sharing ratio in 2012?
b. What was the income-sharing ratio in 2013?
c. How much cash did Justin Thomas contribute to Bonanza, LLC, for his interest?
d. Why do the member equity accounts of Idaho Properties, LLC, and Silver Holdings, LLC, have positive entries for Justin Thomas’ contribution?
e. What percentage interest of Bonanza did Justin Thomas acquire?
f. Why are withdrawals less than net income?
Answer:
a. The income-sharing ratio is determined by dividing the net income for each member by the total net income. Thus, in 2012, the income-sharing ratio is as follows:
Idaho Properties, LLC:
000,320$ 000,128$
= 40%
Silver Holdings, LLC:
000,320$ 000,192$
= 60%
Or a 2:3 ratio
b. Following the same procedure as in (a):
Idaho Properties, LLC:
000,450$ 000,90$
= 20%
Silver Holdings, LLC:
000,450$ 000,225$
= 50%
Justin Thomas:
000,450$ 000,135$
= 30%
Or a 2:5:3 ratio
c. Justin Thomas provided a $270,000 cash contribution to the business. The amount credited to his member equity account is this amount less a $20,000 bonus paid to the other two members, or $250,000.
d. The positive entries to Idaho Properties and Silver Holdings are the result of a bonus paid by Justin Thomas.
e. Justin Thomas acquired a 16% interest in the business on January 1, 2013, computed as follows:
Justin Thomas’, member equity......................... $ 250,000 Idaho Properties, LLC, member equity.............. 688,000 Silver Holdings, LLC, member equity................ 624,500 Total...................................................................... $1,562,500 Thomas’ ownership interest after admission ($250,000 ÷ $1,562,500)....................................... 16%
f. Withdrawals need not be the same as the income credited to the members’ equity accounts. Withdrawals will be less than the amounts credited when the members wish to retain capital in the business to support business growth, or otherwise strengthen the business.
Bonanza, LLC Statement of Members’ Equity For the Years Ended December 31, 2012 and 2013 Idaho Properties, LLC, Member Equity Silver Holdings, LLC, Member Equity
Justin Thomas Member Equity
Total Members’ Equity Members’ equity, December 31, 2011 $552,000 $420,500 $ 972,500 Net income 128,000 192,000 320,000 Members’ equity, December 31, 2012 $680,000 $612,500 $1,292,500 Thomas contribution, January 1, 2013 8,000 12,000 $250,000 270,000 Net income 90,000 225,000 135,000 450,000 Less member withdrawals (32,000) (48,000) (50,000) (130,000) Members’ equity, December 31, 2013 $746,000 $801,500 $335,000 $1,882,500
a. What was the income-sharing ratio in 2012?
b. What was the income-sharing ratio in 2013?
c. How much cash did Justin Thomas contribute to Bonanza, LLC, for his interest?
d. Why do the member equity accounts of Idaho Properties, LLC, and Silver Holdings, LLC, have positive entries for Justin Thomas’ contribution?
e. What percentage interest of Bonanza did Justin Thomas acquire?
f. Why are withdrawals less than net income?
Answer:
a. The income-sharing ratio is determined by dividing the net income for each member by the total net income. Thus, in 2012, the income-sharing ratio is as follows:
Idaho Properties, LLC:
000,320$ 000,128$
= 40%
Silver Holdings, LLC:
000,320$ 000,192$
= 60%
Or a 2:3 ratio
b. Following the same procedure as in (a):
Idaho Properties, LLC:
000,450$ 000,90$
= 20%
Silver Holdings, LLC:
000,450$ 000,225$
= 50%
Justin Thomas:
000,450$ 000,135$
= 30%
Or a 2:5:3 ratio
c. Justin Thomas provided a $270,000 cash contribution to the business. The amount credited to his member equity account is this amount less a $20,000 bonus paid to the other two members, or $250,000.
d. The positive entries to Idaho Properties and Silver Holdings are the result of a bonus paid by Justin Thomas.
e. Justin Thomas acquired a 16% interest in the business on January 1, 2013, computed as follows:
Justin Thomas’, member equity......................... $ 250,000 Idaho Properties, LLC, member equity.............. 688,000 Silver Holdings, LLC, member equity................ 624,500 Total...................................................................... $1,562,500 Thomas’ ownership interest after admission ($250,000 ÷ $1,562,500)....................................... 16%
f. Withdrawals need not be the same as the income credited to the members’ equity accounts. Withdrawals will be less than the amounts credited when the members wish to retain capital in the business to support business growth, or otherwise strengthen the business.
