Concept explainers
1.
Ethical Case Study:
Case Summary:
MB and 2 other partners operate S Partners, a global import-export business, where MB records the partnership transactions. MB travels to the firm in the car as it is the only means of transport and one day the car breaks down on the way to firm. The engine is damaged and the cost to repair comes around $2,000. MB falls short of the amount and takes $2,000 from the firm and records it as firm’s expense, thinking it to be appropriate, as the car is required for daily commute to work.
To Explain: The action of MB as ethical or not.
2.
To Identify: The People affected by the decision of MB.
3.
To Consider: The other alternatives available with MB.
Trending nowThis is a popular solution!
Chapter 1 Solutions
Accounting, Chapters 18-26 - Solution Manual
- Farah and David decide to form a sports memorabilia retail partnership. They have known each other since business graduate school and have always worked well together on various projects. The business is doing well but cash flow is very tight. Farah takes several calls from vendors asking for payment. He believed David had been paying the bills. When he asks about this, David admits to embezzling from the partnership. What liability does Farah face as a result of the theft? Are you for or against a partnership? Please explain.arrow_forwardAmy and Lester are partners in operating a store. Without consulting Amy, Lester enters into a contract to purchase $10,000 of merchandise for the store. Amy says she did not authorize the order and that she could have purchased the same merchandise for $7,000. Amy refuses to pay for the order. The vendor sues the partners. a. Must the partnership pay for the merchandise? If yes, how much? b. Assuming the partnership is a general partnership, can Amy’s personal assets be taken to pay for the merchandise?arrow_forwardNeil and Dylan are partners in a lawn mower repair business in Ohio. While Neil is on vacation visiting his sister in Georgia, his sister's neighbor has trouble with her mower and Neil fixes it for her. She insists on paying him . Neil : O a. may keep the money as this partnership is NOT a professional business pursuant to the non - professional exception rule. O b. may not accept the money because it would create a conflict of interest. O c. may keep the payment since he did the work while he was on vacation. O d. may not accept the money because it would mean he was taking a business opportunity away from the partnership. O e. must turn the money over to the partnership because he earned it doing the kind of work that the partnership does.arrow_forward
- Three friends, X Y and Z decide to form a partnership to carry on a business trading in used cars. X has experience working as a manager and salesman. Y is a skilled motor mechanic. Z is wealthy. The general idea is that Z will be a sleeping partner whose only role is to supply capital for the business. X will be responsible for sales and day to day management of the firm's business. Y will be responsible for purchases of cars and repair work. The firm has a written partnership agreement that contains the above information and further provides; the firm will carry on business using the name XYZ Motors profits and losses shall be shared equally X and Y shall give their full time and attention to the business Continuing partners shall be entitled to buy-out any partner wishing to retire at an agreed price or failing agreement on price at a figure determined by an independent valuer. After the firm has been in operation for several months Z is served with writs for three legal…arrow_forwardHenry is the sole general partner in Middle Ranch Limited, a limited partnership. There are five limited partners. One day, Henry went to the grocery store to purchase groceries for himself. He forgot his personal checkbook. However, he had the partnership's checkbook. Unable to otherwise pay for the groceries, he wrote a check from the partnership account, thinking that he "owned" part of the money in the account anyway.arrow_forwardThe CAB Partnership,although operating profitably, has had a cash flow problem. Unable to meet its current commitments, the firm borrowed $34,000 from a bank giving a long-term note. During a recent meeting, the partners decided to obtain additional cash by admitting a new partner to the firm. They feel that the firm is an attractive investment, but that proper management of their liquid assets will be required. Meyers agrees to invest cash in the firm if her chief accountant can review the accounting records of the partnership. The balance sheet for CAB Partnership as of December 31, 2008, is as follows: Assets Cash...............$ 8,000 Accounts Receivable........33,600 Inventory (at cost) ........35,750 Land..............27,000 Building (net of depreciation)....41,600 Equipment (net of depreciation) ...27,250 Total..............$173,200 Liabilities and Capital Accounts Payable...........$ 32,450 Other Current Liabilities........6,750 Long-Term Note (8% due 2008) ..34,000 Cox,…arrow_forward
- D was tasked to buy all the coffee beans supplies for the partnership. The accountant of the partnership gave D P100,000.00. When D was about to pay the coffee beans, D found out that he was lacking P50,000.00. So that he will not be delayed in delivering the coffee beans, D gave an additional P50,000.00. What right can D avail to get back his P50,000.00? He has the remedy for accounting He has the remedy for return of the capital He has the remedy to file for reimbursement He has the remedy for informationarrow_forwardAuchiel and Ben are working in patnership as accountants. Kuria gives auchiel ksh. 100,000 for investment in some good security. Auchiel hides this to co-partner (Ben) and misappropriates the money. Kuria files a suit on the firm for the recovery of his ksh. 100,000 in your opinion, will he succeed? Give reasons.arrow_forwardFacts: Joan Smith, CPA, receives a telephone call from her client, XYZ Company. The company’s controller states that the board of directors of XYZ has entered into two contractual arrangements with Steve Green, the company’s former president, who has recently retired. Under one agreement, XYZ Company will pay the ex-president $7,000 per month for five years if he does not compete with the company during that time in a rival business. Under the other agreement, the company will pay the ex-president $5,000 per month for five years for such advisory services as the company may request from the ex-president. XYZ’s controller asks Smith whether the balance sheet as of the date the two agreements were signed should show $144,000 in current liabilities and $576,000 in long-term liabilities, or whether the two agreements should only be disclosed in a contingency note to the financial statements (i.e. no amounts should be accrued in the financial statements pursuant to these two…arrow_forward
- KATY, a sole proprietor wanted to expand her profitable business but she does not have enough resources. So, she thought of inviting PERRY to join her and formed a partnership on April 1, 2020. Just before admission, KATY had the following assets and liability accounts: Cash - ₱420,000; Accounts receivable -₱380,000; Inventories -₱250,000; Notes payable -₱100,000. PERRY agreed to contribute cash equal to 30% of KATY’s capital after considering the following adjustments: (a) 2% allowance for bad debts should be recognized, (b) the inventories have fair market value equal to 120% of the balance. How much is the total assets of the partnership after the formation? *arrow_forwardKATY, a sole proprietor wanted to expand her profitable business but she does not have enough resources. So, she thought of inviting PERRY to join her and formed a partnership on April 1, 2020. Just before admission, KATY had the following assets and liability accounts: Cash - ₱420,000; Accounts receivable -₱380,000; Inventories -₱250,000;Notes payable -₱100,000. PERRY agreed to contribute cash equal to 30% of KATY’s capital after considering the following adjustments: (a) 2% allowance for bad debts should be recognized, (b) the inventories have fair market value equal to 120% of the balance. How much is the total assets of the partnership after the formation?arrow_forwardCase Study Louise Mathew is one of three full partners in a newly formed business. Without the permission of the other two partners, she enters into a written contract with a creditor. The transaction binds the firm in the amount of $75,000. Louise then leaves the area and cannot be located by the other two partners. Directions: Answer the following questions and include the characteristics of this business form to provide support for your answer. Are the other two partners liable for the $75,000? What legal features of the partnership apply to this case? Is what Louise has done legal?arrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
- College Accounting, Chapters 1-27 (New in Account...AccountingISBN:9781305666160Author:James A. Heintz, Robert W. ParryPublisher:Cengage Learning