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- The Ace and Deuce partnership has been created to operate a law firm. The partners are attempting to devise a fair system to allocate profits and losses. Ace plans to work more billable hours each year than Deuce. However, Deuce has more experience and can charge a higher hourly rate. Ace expects to invest more money in the business than Deuce. Required Build a spreadsheet that can be used to allocate profits and losses to these two partners each year. The spreadsheet should be constructed so that the following variables can be entered: Net income for the year. Number of billable hours for each partner. Hourly rate for each partner. Capital investment by each partner. Interest rate on capital investment. Profit and loss ratio. Use this spreadsheet to determine the allocation if partnership net income for the current year is $200,000, the number of billable hours is 2,000 for Ace and 1,500 for Deuce, the hourly rate for Ace is $20 and for Deuce is $30, and investment by Ace is $80,000…arrow_forwardThree 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_forwardMartin Manera is one of three partners who own and operate TaftWorld, a global import and export business. Martin is the partner in charge of recording partnership transactions in the accounts. One day while driving to work, Martin’s car broke down. Upon inspection, the mechanic discovered the engine had to be replaced at a cost of $5,000. Martin does not have enough money in his bank account and his credit cards are at their limits. He has to have this car to come to work, and he only uses his car for this purpose. He decides to take $5,000 from the partnership for the repair and record it as an expense of the partnership. What are three ethical issues in this scenario?arrow_forward
- Marco Brolo is one of three partners who own and operate Silkroad Partners, a global import–export business. Marco is the partner in charge of recording partnership transactions in the accounts. On his way to work one day, Marco's car broke down. At the repair shop, Marco learned that his car's engine had significant damage, and it will cost over $2,000 to repair the damage. He does not have enough money in his bank account to cover the cost of the repair, and his credit cards are at their limit. This car is the only form of transportation that Marco has to get to and from work every day. He does not use his car for any business travel. After considering his options, Marco decides to take $2,000 from the partnership for the repair, and record it as an expense of the partnership. He believes that this is appropriate since he needs his car to get to work every day. Is Marco behaving ethically? Why? Who is affected by Marco's decision? What other alternatives might Marco…arrow_forwardMarco Brolo is one of three partners who own and operate Silkroad Partners, a global import– export business. Marco is the partner in charge of recording partnership transactions in the accounts. On his way to work one day, Marco’s car broke down. At the repair shop, Marco learned that his car’s engine had significant damage, and it will cost over $2,000 to repair the damage. He does not have enough money in his bank accountto cover the cost of the repair, and his credit cards are at their limit. This car is the only form of transportation that Marco has to get to and from work every day. He does not use his car for any business travel. After considering his options, Marco decides to take $2,000 from the partnership for the repair and record it as an expense of the partnership. He believes that this is appropriate since he needs his car to get to work every day.1. Is Marco behaving ethically? Why or why not?2. Who is affected by Marco’s decision?3. What other alternatives might Marco…arrow_forwardMacky’s partnership agreement with two partners was done haphazardly and thus caused somelimitations. One of the concerns was uneven productivity among the partners. The agreement requiredeach partner to require to contribute to every aspect of the business to receive an equal portion of theprofits. This agreement did not reflect the idea thata. Partners need not be “equal” because each bring varied talents and knowledge into the partnershipb. General partners are required to be active in day-to-day business operationsc. Customers and creditors of a limited partnership need not to be protectedd. The limited partnership law requires every general partnership to have at least one limited partnere. Each partner may enter into contracts on behalf of all the others.arrow_forward
- What do you call the partner who has the duty to make sure that all the employees enter on time, all the profits are appropriately recorded, all the duties of the employees are performed and perform all the acts that are necessary to keep the partnership gain profits? Limited partner Managing partner Industrial partner General partnerarrow_forwardSam wants to help his brother, Lou, start a new business. Lou isan auto mechanic but has little business sense, so he needs Sam to help him make business decisions. Should this partnership be arranged as a general partnership or a limited partnership? Why? Should they consider any other form for structuring their business? In your post, only discuss the partnership entity options, do not discuss other business types such as S-corporations.arrow_forwardRiki and Sarah, are the owners of Hello Fish Restaurant, a general partnership. What are the chief characteristics, advantages, and disadvantages of this form of business organization? Give an example of how there could be liability for one or both partners based on something that could happen at the restaurant. What organizational structure do you suggest they should form in place of the partnership?arrow_forward
- Jim Bond, a plumber, has been working for Fleming’s Plumbing Supplies for several years. Based on his hard work and the fact that he recently married Ivan Fleming’s daughter, Jim has been invited to enter into a partnership with Fleming. The new partnership will be called Fleming and Bond’s Plumbing Supplies. The terms of the partnership are as follows: (a) Fleming will invest the assets of Fleming’s Plumbing Supplies, and thepartnership will assume all liabilities. The market values of the office and store equipment are estimated to be $18,000 and $8,000, respectively. All other values reported on the balance sheet (shown below) are reasonable approximations of market values. Fleming has no knowledge of any uncollectible accounts receivable.(b) Bond will invest $50,000 cash.(c) Fleming will draw a salary allowance of $50,000 per year, and Bond willreceive $30,000.(d) Each partner will receive 10% interest on the January 1 balance of his capital account.(e) Profits or losses remaining…arrow_forwardJim Bond, a plumber, has been working for Fleming’s Plumbing Supplies for several years. Based on his hard work and the fact that he recently married Ivan Fleming’s daughter, Jim has been invited to enter into a partnership with Fleming. The new partnership will be called Fleming and Bond’s Plumbing Supplies. The terms of the partnership are as follows: a) Fleming will invest the assets of Fleming’s Plumbing Supplies, and the partnership will assume all liabilities. The market values of the office and store equipment are estimated to be $18,000 and $8,000, respectively. All other values reported on the balance sheet are reasonable approximations of market values. Fleming has no knowledge of any uncollectible accounts receivable. b) Bond will invest $50,000 cash. c) Fleming will draw a salary allowance of $50,000 per year, and Bond will receive $30,000. d) Each partner will receive 10% interest on the January 1 balance of his capital account. e) Profits or losses remaining after…arrow_forwardA client of yours is seeking your help in understanding a number of issues involving various aspects of a partnership. The business under consideration is a manufacturer of custom fabricated steel building components such as fire escapes, stairways and landings, and racking systems. Provide a response to each of the questions your client has.1. One of the potential partners wants to allocate partnership profits by including interest on invested capital and bonuses, as a percentage of net income after bonuses. Why would interest on capital be important given this type of business, and what is the best way to measure capital?2. Determining a bonus on net income after the bonus seems counterintuitive. Why not just base the bonus on net income?3. Are drawings and capital the same thing? Why is it necessary to make a distinction?4. If a partner is legally considered an employee of the partnership and receives a regular paycheck and an annual W-2 statement, is this the same thing as the…arrow_forward
- College Accounting, Chapters 1-27 (New in Account...AccountingISBN:9781305666160Author:James A. Heintz, Robert W. ParryPublisher:Cengage Learning