Question

Pena limited liability company (LLC) has two members, Sophia and Maria, who share net income and loss equally. Total equity of the business is $115,000, which is made up of Sophia, Member Equity, of $67,500, and Maria, Member Equity, of $47,500. During the year, Juan invests $37,500 and is admitted to Pena limited liability company (LLC) with a 20% interest in equity and a 20% share in any income and loss. Prepare the entry to record the admission of Juan to the limited liability company (LLC), using the "Juan, Member Equity" account.

Answer 1

The entry to record Juan's admission to Pena Limited Liability Company (LLC) with a 20% interest in equity and income/loss is to update the Member Equity accounts and create a new account for Juan.

Step-by-step explanation:

To record the admission of Juan to the Pena limited liability company (LLC), we need to update the Member Equity accounts and create a new account for Juan. Since Juan is being admitted with a 20% interest in equity, we will calculate his equity by multiplying his investment amount ($37,500) by his equity interest (20%).

First, we will update Sophia and Maria's Member Equity accounts by subtracting their respective equity amounts ($67,500 and $47,500) from the Total Equity of the business ($115,000). Then, we will add Juan's equity ($7,500) to the business's Total Equity, resulting in $122,500.

The journal entry to record Juan's admission would be:

Debit: Juan, Member Equity - $7,500
Credit: Sophia, Member Equity - $7,500
Credit: Maria, Member Equity - $7,500

Answer 2

To record the admission of Juan to Pena limited liability company (LLC), you would adjust the member's equity accounts and create a new account for Juan. The journal entry would involve debiting Juan's equity and crediting the existing member's equity.

Step-by-step explanation:

To record the admission of Juan to Pena limited liability company (LLC), you would need to adjust the member's equity accounts and create a new account for Juan. Since Juan is admitted with a 20% interest in equity and income/loss, his initial investment of $37,500 would be added to the total equity. To distribute the equity, you can calculate the share of equity for each member by dividing their existing member equity by the total equity and then multiply by 80%. The remaining 20% would be Juan's share. The journal entry would be:

Debit Juan, Member Equity: $7,500

Credit Sophia, Member Equity: $10,000

Credit Maria, Member Equity: $7,500