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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Ethics in Action

Tayc Barrow, M.D., and James Robbins, M.D., are sole owners of two medical practices that operate in the same medical building. The two doctors agree to combine assets and liabilities of the two businesses to form a partnership. The partnership agreement calls for dividing income equally between the two doctors. After several months, the following conversation takes place between the two doctors:

Barrow: I've noticed that your patient load has dropped over the last couple of months When we formed our partnership, we were seeing about the same number of patients per week. However, now our patient records show that you have been seeing about half as many patients as I have. Are there any issues that I should be aware of?

Robbins: There's nothing going on. When I was working on my own, I was realty putting in the hours. One of the reasons I formed this partnership was to enjoy life a little more and scale back a little bit.

Barrow: I see. Well, I find that I'm working as hard as I did when I was on my own yet making less than I did previously. Essentially, you're sharing in half of my billings and I’m sharing in half of yours. Since you are working much less than I am, I end up on the short end of the bargain.

Robbins Well. I don't know what to say An agreement is an agreement. The partnership is based on a 50/50 split That's what a partnership is all about.

Barrow: If that's so, then it applies equally well on the effort end of the equation as it does on the income end.

Discuss whether Robbins is acting in an ethical manner. How could Barrow renegotiate the partnership agreement to avoid this dispute?

To determine

Ethical Case Study

Case Summary:

Dr. B and Dr. R are sole owners of two medical practices that operate in the same medical building. The two doctors agree to combine assets and liabilities of the two businesses to form a partnership. As per the partnership agreement the income will be divided equally between two doctors. After several months of partnership a conversation took place between the two partners, where Dr. B said Dr. R that he had noticed that the patient load of Dr. R has dropped over the last couple of months. When they formed partnership they both were seeing same number of patients per week, but the present patient record of Dr. R shows that he is seeing half as many as patients seeing by Dr. B. So Dr. B enquired if there is any issue with Dr. R which he should be aware of. Dr. R responded that there was no issue and one of his reasons of joining partnership was that he wanted to enjoy his life little more and scale back a little bit. To which Dr. B said that he is working as hard as when he was on his own, but making less money than previously. He said both of them sharing half of each other billings, and as Dr. R is working less than him so he is ending up on the short end of the bargain. Dr. R responded that it’s the agreement, and partnership is based on 50/50 split. To which Dr. B replied that it should be applied to the effort end of the equation as that is applied to the income end.

To discuss: If Dr. R is acting in ethical manner and how Dr. B can renegotiate the partnership agreement to avoid the dispute?

Explanation

No, Dr. R is not acting in ethical manner. He was purposefully not seeing more patients. As he mentioned that one of his reasons of forming partnership was he can enjoy his life little more and scale back a little bit. But Dr. B was not aware of this fact; he consummated the partnership as he thought Dr. R’s past effort will be continued in the future.

Dr. B either can withdraw or alter the partnership agreement in order to avoid the dispute...

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