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 $100,000, which is made up of Sophia, Member Equity, of $60,000, and Maria, Member Equity, of $40,000. During the year, Juan invests $30,000 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. View transaction list Journal entry worksheet < > Record admission of Juan to LLC. Note: Enter debits before credits. Transaction General Journal Debit Credit 1 Record entry Clear entry View general journal

Answer 1

To admit Juan to Pena LLC, debit Sophia and Maria's equity accounts by $12,000 each, and credit Juan's equity account with $30,000.

Step-by-step explanation:

To record the admission of Juan to Pena limited liability company (LLC), we need to create a new account called 'Juan, Member Equity.' Since Juan's investment represents a 20% interest in equity and income/loss, we will credit the 'Juan, Member Equity' account with $30,000. On the other side, we will debit the respective equity accounts of Sophia and Maria, reducing their equity by $12,000 each.

The journal entry would be:

General Journal

Debit Debit $12,000 Sophia, Member Equity

Debit Debit $12,000 Maria, Member Equity

Credit $30,000 Juan, Member Equity

Answer 2

The entry to record the admission of Juan to the limited liability company (LLC) with a 20% interest in equity and a 20% share in any income and loss is Debit Juan, Member Equity - $6,000, Credit Sophia, Member Equity - $3,000, Credit Maria, Member Equity - $2,000, Credit Juan, Member Equity - $1,000.

Step-by-step explanation:

To record the admission of Juan to the limited liability company (LLC) with a 20% interest in equity and a 20% share in any income and loss, the following entry should be made:

• Debit: Juan, Member Equity - $6,000
• Credit: Sophia, Member Equity - $3,000
• Credit: Maria, Member Equity - $2,000
• Credit: Juan, Member Equity - $1,000

This entry reflects the increase in Juan's equity and the corresponding decrease in Sophia and Maria's equity. Juan's equity is calculated as 20% of the total equity of $100,000, which is $20,000. As Juan is making a $30,000 investment, $20,000 of it is allocated to his equity account while the remaining $10,000 is contributed to the company's overall equity.