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. Forming a Partnership While forming the partnership, the contribution of assets by partners are debited to the partnership assets account; whereas the liabilities of the partnerships are credited to the partnership’s liabilities account, and the net amount of the investments of partners are credited to the partners’ individual capital account. To Suggest: The partners in developing a method for dividing income

Question

Terry Willard and Jasmine Hill decide to form a partnership. Willard will contribute $300,000 to the partnership, while hill will contribute only $30,000. However, Hill will be responsible for running the day-to-day operations of the partnership, which are anticipated to require about 45 hours per week. In contrast, Willard will only work five hours per week for partnership. The two partners are attempting to determine a formula for dividing partnership net income. Willard believes the partners should divide income in the ratio of 7:3, favoring Willard, since Willard provides the majority of the capital. Hill believes the income should divided 7:3, favoring Hill, since Hill provides the majority of effort in running the partnership business. How would you advise the partners in developing a method for diving income?

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Question

Chapter 12, Problem 12.4CP

To determine

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.

Forming a Partnership

While forming the partnership, the contribution of assets by partners are debited to the partnership assets account; whereas the liabilities of the partnerships are credited to the partnership’s liabilities account, and the net amount of the investments of partners are credited to the partners’ individual capital account.

To Suggest: The partners in developing a method for dividing income

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Terry Willard and Jasmine Hill decide to form a partnership. Willard will contribute $300,000 to the partnership, while hill will contribute only $30,000. However, Hill will be responsible for running the day-to-day operations of the partnership, which are anticipated to require about 45 hours per week. In contrast, Willard will only work five hours per week for partnership. The two partners are attempting to determine a formula for dividing partnership net income. Willard believes the partners should divide income in the ratio of 7:3, favoring Willard, since Willard provides the majority of the capital. Hill believes the income should divided 7:3, favoring Hill, since Hill provides the majority of effort in running the partnership business. How would you advise the partners in developing a method for diving income?

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