Answered: George, Burton, and Dillman have been…

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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Question

George, Burton, and Dillman have been partners for
three years. The partnership is being dissolved. George is
leaving the firm, but Burton and Dillman plan to carry on
the business. In the final settlement, George places a
$75,000 salary claim against the partnership. He contends
that he has a claim for a salary of $25,000 for each year
because he devoted all of his time for three years to the affairs
of the partnership. Is his claim valid? Why or why not?

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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