EX 12-25 Statement of LLC liquidation
Hall, Lang, and Das are members of Evergreen Sales, LLC, sharing income and losses in the ratio of 2:2:1, respectively. The members decide to liquidate the limited liability company. The members’ equity prior to liquidation and asset realization on May 1, 2012, are as follows:
Hall $37,000
Lang 40,000
Das 18,000
Total $95,000
In winding up operations during the month of May, noncash assets with a book value of $107,000 are sold for $123,000, and liabilities of $25,000 are satisfied. Prior to realization, Evergreen Sales has a cash balance of $13,000.
a. Prepare a statement of LLC liquidation.
b. Provide the journal entry for the final cash distribution to members.
c. What is the role of the income- and loss-sharing ratio in liquidating a LLC?
Answer:
EVERGREEN SALES, LLC Statement of LLC Liquidation For the Period May 1–31, 2012
Member Equity Noncash Hall Lang Das Cash + Assets = Liabilities + (2/5) + (2/5) + (1/5) Balances before realization............. $ 13,000 $ 107,000 $ 25,000 $ 37,000 $ 40,000 $ 18,000 Sale of assets and division of gain........................................... + 123,000 – 107,000 — + 6,400 + 6,400 + 3,200 Balances after realization................ $ 136,000 $ 0 $ 25,000 $ 43,400 $ 46,400 $ 21,200 Payment of liabilities........................ – 25,000 — – 25,000 — — — Balances after payment of liabilities........................................ $ 111,000 $ 0 $ 0 $ 43,400 $ 46,400 $ 21,200 Distribution of cash to members.... – 111,000 — — – 43,400 – 46,400 – 21,200 Final balances.................................. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
b. Hall, Member Equity..................................................... 43,400 Lang, Member Equity................................................... 46,400 Das, Member Equity..................................................... 21,200 Cash......................................................................... 111,000
c. The income- and loss-sharing ratio is only used to distribute the gain or loss on the realization of asset sales. It is not used for the final distribution. The final distribution is based upon the credit balances in the member equity accounts after all gains and losses on realization have been divided and any partner deficiencies have been paid or allocated.
Hall $37,000
Lang 40,000
Das 18,000
Total $95,000
In winding up operations during the month of May, noncash assets with a book value of $107,000 are sold for $123,000, and liabilities of $25,000 are satisfied. Prior to realization, Evergreen Sales has a cash balance of $13,000.
a. Prepare a statement of LLC liquidation.
b. Provide the journal entry for the final cash distribution to members.
c. What is the role of the income- and loss-sharing ratio in liquidating a LLC?
Answer:
EVERGREEN SALES, LLC Statement of LLC Liquidation For the Period May 1–31, 2012
Member Equity Noncash Hall Lang Das Cash + Assets = Liabilities + (2/5) + (2/5) + (1/5) Balances before realization............. $ 13,000 $ 107,000 $ 25,000 $ 37,000 $ 40,000 $ 18,000 Sale of assets and division of gain........................................... + 123,000 – 107,000 — + 6,400 + 6,400 + 3,200 Balances after realization................ $ 136,000 $ 0 $ 25,000 $ 43,400 $ 46,400 $ 21,200 Payment of liabilities........................ – 25,000 — – 25,000 — — — Balances after payment of liabilities........................................ $ 111,000 $ 0 $ 0 $ 43,400 $ 46,400 $ 21,200 Distribution of cash to members.... – 111,000 — — – 43,400 – 46,400 – 21,200 Final balances.................................. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
b. Hall, Member Equity..................................................... 43,400 Lang, Member Equity................................................... 46,400 Das, Member Equity..................................................... 21,200 Cash......................................................................... 111,000
c. The income- and loss-sharing ratio is only used to distribute the gain or loss on the realization of asset sales. It is not used for the final distribution. The final distribution is based upon the credit balances in the member equity accounts after all gains and losses on realization have been divided and any partner deficiencies have been paid or allocated.
