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Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124
Textbook Problem

Josiah Harlow, Patty DuMont, and Owen Maholic are contemplating the formation of a partnership. According to the partnership agreement, Barlow is to invest $60,000 and devote one-half time, DuMont is to invest $40,000 and devote three-fourths time, and Maholic is to make no investment and devote full lime. Would Maholic be correct in assuming that since he is not contributing any assets to the firm, he is risking nothing? Explain.

To determine

Explain if Mr. M is risking nothing.

Explanation

Partnership: It is that form of organization which is owned and managed by two or more persons who invest and share the profits and losses according to a pre-determined ratio.

No, Mr. M would be wrong to assume that he is risking nothing. Mr. M is liable to bear his share of losses...

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