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ACTPACO
INDIVIDUAL BUSINESS CASE
1T AY 2013-14
Reference: Accounting 2nd edition. Waren,C., Reeve, J.,and Duchac, J. ( with slight modifications)
Case 1. Partnership agreement
Jose Reyes, M.D. and Joseph Luke, M.D. are sole owners of two medical practices that operate in the same medical building. The two doctors agree to combine assets and liabilities of the two businesses to form a partnership. The partnership agreement calls for dividing income equally between the two doctors. After several months, the following conversation takes place between the two doctors:
Reyes: I have noticed that your patient load has dropped over the last couple of months. When we formed our partnership, we were seeing about the same number of patients per week. However, now our patient records show that you have been seeing about half as many patients as I have. Are there any issued I should be aware of?
Luke: I see. Well, I find that I am working as hard as I did when I was on my own, yet making less that I did previously. Essentially, you are sharing in half of my billings and I am sharing in half of yours. Since you are working much less than I am, I end up on the short end of the bargain.
Reyes: Well, I don’t know what to say. An agreement is an agreement. The partnership is based on a 50/50 split. That’s what a partnership is all about.
Luke: I that is so, then it applies equally well on the effort end of the equation as on the income end.
Answer the following:
1. Discuss whether Reyes is acting in an ethical manner.
2. How could Luke renegotiate the partnership agreement to avoid dispute?
Case 2. Partnership Income
Jaclyn Dantes and Bonita Perez decide to form a partnership. Dantes will contribute P300,000 to the partnership, while Perez will contribute P100,000. However, Perez will be responsible for running the day-to-day operations of the partnership, which are anticipated to require about 45 hours per week. In
INDIVIDUAL BUSINESS CASE
1T AY 2013-14
Reference: Accounting 2nd edition. Waren,C., Reeve, J.,and Duchac, J. ( with slight modifications)
Case 1. Partnership agreement
Jose Reyes, M.D. and Joseph Luke, M.D. are sole owners of two medical practices that operate in the same medical building. The two doctors agree to combine assets and liabilities of the two businesses to form a partnership. The partnership agreement calls for dividing income equally between the two doctors. After several months, the following conversation takes place between the two doctors:
Reyes: I have noticed that your patient load has dropped over the last couple of months. When we formed our partnership, we were seeing about the same number of patients per week. However, now our patient records show that you have been seeing about half as many patients as I have. Are there any issued I should be aware of?
Luke: I see. Well, I find that I am working as hard as I did when I was on my own, yet making less that I did previously. Essentially, you are sharing in half of my billings and I am sharing in half of yours. Since you are working much less than I am, I end up on the short end of the bargain.
Reyes: Well, I don’t know what to say. An agreement is an agreement. The partnership is based on a 50/50 split. That’s what a partnership is all about.
Luke: I that is so, then it applies equally well on the effort end of the equation as on the income end.
Answer the following:
1. Discuss whether Reyes is acting in an ethical manner.
2. How could Luke renegotiate the partnership agreement to avoid dispute?
Case 2. Partnership Income
Jaclyn Dantes and Bonita Perez decide to form a partnership. Dantes will contribute P300,000 to the partnership, while Perez will contribute P100,000. However, Perez will be responsible for running the day-to-day operations of the partnership, which are anticipated to require about 45 hours per week. In