L.W. Clement and his brother Charles formed a partnership in the 1920s to run a plumbing business. The partnership lasted some 40 years. However Charles ultimately became suspicious of the way L.W., who had total control over the partnership finances, was handling partnership funds. He filed an equity suit maintaining that L.W. had used partnership funds to invest in personal real estate and insurance policies. The chancellor of equity heard the case and awarded Charles one-half interest in the real estate and insurance policies in question. The appellate court reversed the chancellor’s decision saying that Charles had no claim as he could not trace the flow of partnership funds into L.W.’s investments. The Supreme Court of Pennsylvania then agreed to hear the case. The issue as perceived by the Pennsylvania Supreme Court was whether L.W. owed to Charles the duty of negating the inference that the source of the funds for the investment was the partnership coffers. Decide. (Clement v. Clement, 260 A.2d 728)

On January 1 Vernon and Engel became partners in a food brokerage business. Later, they disagreed about the way profits were being divided and expenses were being paid. On August 1 they dissolved the partnership by mutual agreement. Vernon ran the business during the winding-up period. He claimed that Engel had violated their agreement and therefore was not entitled to his share of the profits. Vernon also argued that because he had carried on the business during the winding-up period, Engel was not entitled to any commissions collected during that time. Is Vernon right? (Engel v. Vernon, 215 N.W.2d 506)

Aki, Degas, and Kline were partners in an air-conditioning business. They obtained a $275,000 contract to install units in a candy factory. Long before the job was finished, Kline accepted the final payment of$100,000 and disappeared with the money. Must Aki and Degas absorb the loss and complete the job for the $175,000 already paid to them, without being paid an additional$100,000 by the candy factory?

Michelle Delatorre has required you to put in a great deal of overtime, so you have had little time to spend on your personal finances. It is now April 1, and you have only two weeks left to file your income tax return. You have managed to gather together all of the information that you will need to complete your return.

You also compute the taxes for the corporation that your parents own. This company has $100,000 of taxable income from operations plus$5,000 of interest income and $100,000 of dividend income. During the previous year, the company paid dividends equal to$8,000. What is its tax liability?

James Kirk is a financial executive with McDowell Enterprises. Although James Kirk has not had any formal training in finance or accounting, he has a "good sense" for numbers and has helped the company grow from a very small company ($500,000 sales) to a large operation ($45 million in sales). With the business growing steadily, however, the company needs to make a number of difficult financial decisions in which James Kirk feels a little "over his head." He therefore has decided to hire a new employee with "numbers" expertise to help him. As a basis for determining whom to employ, he has decided to ask each prospective employee to prepare answers to questions relating to the following situations he has encountered recently. Here is one of the questions

Last year the company exchanged a piece of land for a non-interest-bearing note. The note is to be paid at the rate of $15,000 per year for 9 years, beginning one year from the date of disposal of the land. An appropriate rate of interest for the note was 11%. At the time the land was originally pur- chased, it cost$90,000. What is the fair value of the note?

Dragonfly Limited (Dragonfly), a diversified electronics firm headquartered in Singapore, reported the following income statement information for its year ended December 31, Year 7. Dragonfly applies Singapore financial reporting standards and reports its results in thousands of Singapore dollars ($). In answering this problem, assume Dragonfly uses either U.S. GAAP or IFRS; for purposes of this problem, this choice will not matter.$

$$\begin{array}{lr} &{\text { Year } 7} \\ \hline \text{Sales}&\$ 460,830 \\ \text{Cost of Sales}&(416,378) \\ \hline\text{Gross Profit}& 44,452 \\ \text{Other Income }&1,558 \\ \text{Selling and Marketing Costs}&(20,714) \\ \text{General and Administrative Costs}&(20,254) \\ \text{Development Costs}&(1,232) \\ \text{Finance Costs, net}&(6,692) \\ \text{Gain on Sale of Land}&6,546 \\ \text{Share in Results of Associated Companies}&(2) \\ \hline \text{Profit Before Tax}&3,662 \\ \text{Taxation}&(1,094) \\ \hline \text{Profit (Loss)}& \$2,568 \\ \hline \hline \text{Portion of Profit Owned by Minority Interests}&(567) \\ \text{Portion of Profit Owned by Shareholders}&3,135 \\ \hline \end{array}$$

$Assume that Dragonfly supplied additional information about the following six hypothetical transactions or events that happened during Year 7, with all monetary amounts reported in thousands of Singapore dollars.

For each transaction, determine whether revenues and expenses for Year 7 are over- or understated.

e. In December Year 7, Dragonfly recognized interest income on investments in marketable securities of$230. The firm included this income in sales revenues.

29% of adults do not own a credit card. (a) Suppose a random sample of 500 adults is asked, "Do you own a credit card?" Describe the sampling distribution of $\hat{p}$, the proportion of adults ho do not own a credit card. (b) What is the probability that in a random sample of 500 adults more than 30% do not own a credit card? (c) What is the probability that in a random sample of 500 adults between 25% and 30% do not own a credit card? (d) Would it be unusual for a random sample of 500 adult s to result in 125 or fewer who do not own a credit card? Why?

Lewis owned a vacant building. He persuaded Dinkelspeel to open and to conduct a business called The Buffet in the property. Together, they purchased furniture, fixtures, and merchandise. They agreed that Dinkelspeel was to run the business and that profits were to be divided equally. Lewis’s interest was not to be disclosed to the public, although he was to raise necessary funds and provide the building space. When the International Association of Credit Men sued both parties for goods sold to The Buffet, Lewis denied liability as a partner. Is he a partner? If so, what kind? If he is a partner, what is his liability? (International Association of Credit Men v. Lewis, 50 Wyo. 380, 62 P.2d 294)

Stanton and Tokun agree to work together as partners for a year. Both are experienced in treating wooden shingle and shake roofs to make them fire resistant and waterproof. Stanton puts up the $20,000 capital needed for equipment and supplies. Both agree to work full time, and each draws a salary of$2,500 a month. Stanton does all of the difficult sales work, as well as helping on site. Tokun is slow on the job and repeatedly fails to show up, falsely claiming to be sick. In fact, he goes fishing and hunting on long weekends. At the end of the year, the firm shows a net profit of $25,000 after all expenses and the return of Stanton’s capital contribution. How should the net profit be divided? Why?

Sol and Tom decide to go forward with the new storefront and to organize as a corporation. Now another employee is delivering tickets and has an accident. What are the potential consequences for the owners’ business and personal assets?

As Sol and Tom’s business continued to grow, they decided to open a storefront on the main access road into Branson. Unfortunately, their business was still too new to get a loan from the bank, and their personal credit standings would not support a loan the size they needed. They did have some friends who were interested in investing in their business. However, the friends did not want to be exposed to unlimited personal liability. What type of business organization seems ideal in this situation, and why?

If Nadine has another accident while delivering tickets, what might the consequences be for Sol and Tom’s business and personal assets?

After several months of brokering tickets to tour directors, Sol thought it would be a good idea if he offered his ticket service to people on the Internet. His friend Tom was a computer programmer, and Sol made him an offer to join the business. Tom would control computer marketing of the tickets and, rather than a salary, would receive a percentage of the profits. What form of business organization exists between Sol and Tom?

Sol hired Nadine to deliver the tickets in his car to the theaters just as the tour buses arrived. If Nadine has an accident on such an errand, what are the potential consequences for Sol’s business and his personal assets?