Solutions 1~ - Quick Study D-1(10 minutes a The partnership...

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Quick Study D-1 (10 minutes) a. The partnership will need to pay because it is a merchandising firm. That is, if the vendor knows nothing to the contrary, the vendor can assume that Leon has the right, because of mutual agency, to bind the firm to contracts for the purchase of merchandise. b. A public accounting firm is not in the merchandising business. Consequently, because the purchase of merchandise to be sold is not within the normal scope of the business of this firm, the vendor has no right to assume Leon is acting as the agent for the partnership. Hence, the partnership probably will not have to pay. Quick Study D-2 (15 minutes) Stolton Bright Total Net income ........................................... 52,000 Salary allowances Stolton ............................................... $15,000 Bright ................................................. $20,000 Total salary allowances ................... 35,000 Balance of income .............................. 17,000 Balance allocated equally Stolton ............................................... 8,500 Bright ................................................. 8,500 Total allocated equally ..................... 17,000 Balance of income .............................. ______ ______ $ 0 Shares of the partners $23,500 $28,500 Quick Study D-3 (10 minutes) If Blake is allocated a $100,000 salary allowance and there remains $4,000 to be divided equally, giving Matthai $2,000, then this shows that the partnership must have earned net income of $104,000.
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