Harrison Hartwell & Zenith Is a Successful Law Firm Employing

question 83

Essay

Harrison Hartwell & Zenith is a successful law firm employing 26 professionals. There is an internal controversy over allocation of the $104,000 purchase cost of a highly sophisticated electronic law library. Each professional employee of the firm has been assessed $4,000 as a charge against the profit distribution account of each of the 26 members affected. In addition, it is expected to cost about $2,600 per month to update information for the library system, resulting in a monthly $100 assessment against each professional in the firm.
Required:
(a) As a new junior member of the professional legal group of 26, why might you not like the proposed electronic library cost allocation?
(b) Propose an alternate allocation method for both the initial purchase cost and the updating charge that is more equitable (fair).
(c) Could one argue for no allocation at all in this case? On what basis?

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Definitions:

Increase Borrowing

The act of obtaining more funds through loans, typically to support business operations or expansion.

Cash Cycle

The time between cash disbursement and cash collection.

Receivables Balance

The total amount of money owed to a company by its customers for goods or services delivered or used but not yet paid for.

Accounts Receivable Turnover

This ratio measures how efficiently a company collects revenue from its customers by dividing total sales by the average accounts receivable during a specific period.