Answered: Amy and Jeff Barnes are going to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Amy and Jeff Barnes are going to operate their florist shop as a partnership or as an S corporation. After paying salaries of $45,000 to each of the owners, the shop’s earnings are projected to be about $60,000. The earnings are to be invested in the growth of the business. What would you advise them as to which of the two entity forms they should select.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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