Question

ACCT1020

HD Web Page Unit1 Discussion 1 Discussion Topic Starts Aug 24, 2020 1:00 AM Ends Oct 11, 2020 11:30 PM Read chapter 12 carefully before posting your solution to this problem. Jerry Graves and Bonnie Moss decide to form a partnership. Graves will contribute $300,000 to the partnership, while Moss will contribute only $30,000. However, Moss 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, Graves will only work five hours per week for the partnership. The two partners are attempting to determine a formula for dividing partnership net income, Graves believes the partners should divide income in the ratio of 7:3, favoring Graves, since Graves provides the majority of the capital. Moss believes the income should be divided 7:3, favoring Moss, since Moss provides the majority of effort in running the partnership business. How would you advise the partners in developing a method for dividing income? Please note that you have to post your answer first before you can see other posts. Your grade is on 80-20 basis. 80% goes to your 1st post and 20% goes to your response to another student's post.

Answer 1

Graves contribution = $300, 000

Moss contribution = $ 30000

Total contribution = $ 330,000

Working hours graves = 5 per week

Working Moss = 45 per week

Total = 50 per week

Graves says 7:3 to him and moss says 7: 3 to him

There are two options available for profit distribution

1.To divide the profit in the ratio of the capital contribution since Grave provided the majority of the capital to run the business and to pay salary to moss for the hours worked and distribute the profit in 30:3

2. To pay a fixed allowed interst to capital contribution and then distribute the profit in the ratio of the ratio of the working hours of the partners i.e 45:5

Choosing any one would be ideal to them for contribution and working hours