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Partnership Case Study:
Dexter and Jake are brothers who manage “Beauty Cosmetic Clinic” as partners who share profits and losses equally. The clinic is performing profitably as the success of their business exceeded their expectations. Dexter is keen on boosting profits, and schedules appointments from 8a.m. to 6p.m. daily, at the expense of sacrificing some lunch hours to accommodate regular patients. Contrarily, Jake schedules his appointments from 9a.m. to 5p.m. and takes long lunch hours. Jake frequently makes significantly larger withdrawals of cash than Dexter does, but he assures him, “Dexter, don’t worry. I never make withdrawals without your knowledge. It is properly recorded in my drawing account.” To date, Jake’s withdrawals doubled compared with Dexter.
1. Identify the stakeholders in this condition.
2. Discuss the problems with Jake’s actions and explain the ethical considerations of his actions.
3. Propose a revised partnership profit and loss distribution agreement that will correspond the differences in Dexter’s and Jake’s work and withdrawal habit.
4. Using the revised partnership profit and loss distribution agreement you proposed in question number 3, divide the net income of Beauty Cosmetic Clinic amounting to $730,000 for the year ended January 31, 2019 between Dexter and Jake.
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