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 dont know what to say. An agreement is an agreement. The partnership is based on a 50/50 split. Thats 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 contrast, Dantes will only work five hours per week for the partnership. The two partners are attempting to determine a formula for dividing partnership net income. Dantes believes the partners should divide income in the ratio of 7:3, favoring Dantes, since Dantes provided majority of the capital. Perez believes the income should be divided 7:3, favoring Perez, since Perez provides majority of the effort in running partnership business. How would you advise the partners in developing a method for dividing income? Format:

. Short bond paper . Double spaced . One inch margin in all sides . Minimum of two pages (not including the cover page and the business case page) . Attach this page as the last page of your report . Font: Tahoma 11 . Cover page: PARTNERSHIP AGREEMENT

A business case Presented to the Accountancy Department De La Salle University In partial fulfillment Of the course requirements

in ACTPACO (sec) .

Surname, First Name, M.l. Date