Tecumseh Cafe A and B.doc - Tecumseh Caf(A On the...

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Tecumseh Café (A) On March 31, 1973, the partnership that had been organized to operate the Tecumseh Café was dissolved under unusual circumstances, and its connection with its dissolution , preparation of a balance sheet became necessary. The partnership was formed by Mr. and Mrs. Frank Rayburn and Mrs. Grace Harris, who had become acquainted while working in a Portland, Oregon, restaurant. On November 1, 1972, each of the three partners contributed $5,000 cash to the partnership. The Rayburns’ contribution represented practically all of their savings. Mrs Harris’ payment was the proceeds of her late husband’s insurance policy. On that day also the partnership signed a one year lease to the Tecumseh Café, located in a nearby recreational area. The monthly rent on the café was $600. They were attracted to this facility in part because there were living accommodations on the floor above the restaurant.. One room was occupied by the Rayburns and another by Mrs. Harris They borrowed $6,000 from a local bank, and used this plus $12,000 of partnership funds to buy out the previous operator of the café. Of this amount, $17,000 was for equipment, and $1,000 was for food and beverages then on hand. The partnership paid $ 240 for local operating licenses good for one year beginning November 1, and paid $500 for a new cash register. The remainder of the $21,000 was deposited in a checking account. The partners opened the restaurant shortly after November 1, Mr. Rayburn was the cook, and Mrs. Rayburn and Mrs. Harris waited on customers. Mrs. Rayburn also ordered the food, beverages, and supplies, operated the cash register, and was responsible for the checking account. The restaurant opened throughout the winter seasonof 1972-73. It was not very successful. On the morning of March 31, 1973, Mrs Rayburn discovered that Mr. Rayburn and Mrs. Harris had disappeared. Mrs. Harris had taken all her possessions, but Mr. Rayburn had left behind most of his clothing, presumably because he could not remove it without warning Mrs. Rayburn. The new cash register and its content were also missing. Mrs Rayburn concluded that the partnership was dissolved. (The court subsequently affirmed that the partnership was dissolved as of March 30.) Mrs. Rayburn decided to continue operating the Tecumseh Café. She realized that an accounting would have to be made as
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of March 30, and called in Frank Whittaker, an acquaintance who was knowledgeable about accounting.
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