Lori and Dan Own a Small Restaurant as Partners

question 42

Multiple Choice

Lori and Dan own a small restaurant as partners.Dan works several hours a day cooking,waiting on tables,doing the books,and so forth.Dan believes he is entitled to be paid at least a standard wage for all his work since,at the present time,the part-time kitchen helpers earn more than he does! Lori claims Dan is not entitled to anything other than one-half the net profits.Is Lori right?

• A)Yes.The UPA states a partner may not collect a "wage" from the partnership business under any circumstances.
• B)Yes,if there is no agreement between Lori and Dan allowing for either of them to be paid wages for work done at the restaurant.
• C)No.Dan may collect only minimum wage,as required by federal law.
• D)No.Dan may collect a fair wage for the work he has performed.

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Definitions:

Net Income

The residual income of a company after all operational costs and taxes have been taken out of its revenue.

Comparative Financial Statement

Financial reports that present a company’s financial performance across different periods, allowing for comparison and analysis of trends.

Solvency

The ability of an entity to meet its long-term financial obligations and continue its operations into the foreseeable future.

Liquidity

The ease with which an asset or an investment can be converted into cash without significantly affecting its price.