BYPI2-2 Stephen Wadson and Mary Shively, two professionals in the finance area, have worked for Morrisen Leasing for a number of years. Morrisen Leasing is a company that leases high-tech medical equipment to hospitals. Stephen and Mary have decided that, with their financial expertise, they Steps might start their own company to perform consulting services for individuals interested in leasing equipment. One form of organization they are considering is a partnership. If they start a partnership, each individual plans to contribute S50,000 in cash. In addition, Stephen has a used IBM computer that originally cost $3,700, which he intends to invest in the part- nership. The computer has a present fair value of $1,500. Although both Stephen and Mary are financial wizards, they do not know a great deal about how a partnership operates. As a result, they have come to you for advice. Instructions With the class divided into groups, answer the following. 1. (a) What are the major disadvantages of starting a partnership? 2. (b) What type of document is needed for a partnership, and what should this document contain? 3. (c) Both Stephen and Mary plan to work full-time in the new partnership. They believe that net income or net loss should be shared equally. However, they are wondering how to provide com- pensation to Stephen Wadson for his investment of the computer. What would you tell them? 4. (d) Stephen is not sure how the computer equipment should be reported on his tax return. What would you tell him? 5. (e) As indicated above, Stephen and Mary have worked together for a number of years. Stephen's skills complement Mary's and vice versa. If one of them dies, it will be very difficult for the other to maintain the business, not to mention the difficulty of paying the deceased partner's estate for his or her partnership interest. What would you advise them to do?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
BYP12-2 Stephen Wadson and Mary Shively, two professionals
in the finance area, have worked for Morrisen Leasing for a
number of years. Morrisen Leasing is a company that leases
high-tech medical equipment to hospitals. Stephen and Mary
have decided that, with their financial expertise, they
Steps
might start their own company to perform consulting services
for individuals interested in leasing equipment. One form of
organization they are considering is a partnership.
If they start a partnership, each individual plans to contribute
50,000 in cash. In addition, Stephen has a used IBM computer
that originally cost $3,700, which he intends to invest in the
part- nership. The computer has a present fair value of $1,500.
Although both Stephen and Mary are financial wizards, they do
not know a great deal about how a partnership operates. As a
result, they have come to you for advice.
Instructions
With the class divided into groups, answer the following.
1. (a) What are the major disadvantages of starting a
partnership?
2. (b) What type of document is needed for a partnership, and
what should this document contain?
3. (c) Both Stephen and Mary plan to work full-time in the
new partnership. They believe that net
income or net loss should be shared equally. However, they
are wondering how to provide com-
pensation to Stephen Wadson for his investment of the
computer. What would you tell them?
4. (d) Stephen is not sure how the computer equipment
should be reported on his tax returm. What
would you tell him?
5. (e) As indicated above, Stephen and Mary have worked
together for a number of years. Stephen's
skills complement Mary's and vice versa. If one of them
dies, it will be very difficult for the other to maintain the
business, not to mention the difficulty of paying the
deceased partner's estate for his or her partnership interest.
What would you advise them to do?
Transcribed Image Text:BYP12-2 Stephen Wadson and Mary Shively, two professionals in the finance area, have worked for Morrisen Leasing for a number of years. Morrisen Leasing is a company that leases high-tech medical equipment to hospitals. Stephen and Mary have decided that, with their financial expertise, they Steps might start their own company to perform consulting services for individuals interested in leasing equipment. One form of organization they are considering is a partnership. If they start a partnership, each individual plans to contribute 50,000 in cash. In addition, Stephen has a used IBM computer that originally cost $3,700, which he intends to invest in the part- nership. The computer has a present fair value of $1,500. Although both Stephen and Mary are financial wizards, they do not know a great deal about how a partnership operates. As a result, they have come to you for advice. Instructions With the class divided into groups, answer the following. 1. (a) What are the major disadvantages of starting a partnership? 2. (b) What type of document is needed for a partnership, and what should this document contain? 3. (c) Both Stephen and Mary plan to work full-time in the new partnership. They believe that net income or net loss should be shared equally. However, they are wondering how to provide com- pensation to Stephen Wadson for his investment of the computer. What would you tell them? 4. (d) Stephen is not sure how the computer equipment should be reported on his tax returm. What would you tell him? 5. (e) As indicated above, Stephen and Mary have worked together for a number of years. Stephen's skills complement Mary's and vice versa. If one of them dies, it will be very difficult for the other to maintain the business, not to mention the difficulty of paying the deceased partner's estate for his or her partnership interest. What would you advise them to do?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Characteristics Of Insurance
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education