Reference - Big Spender

question 76

Multiple Choice

Reference - Big Spender. Wally was a partner in XYZ law firm. He decided to withdraw from the partnership because he wanted to retire early somewhere in the Caribbean. The partnership agreement of XYZ law firm did not specify the objective or duration of the partnership. Although Wally gave proper notice prior to his withdrawal and the dissolution of the partnership, the other partners claimed that he acted illegally. Wally was angry and decided to get even. He went to the office supply store at which he typically purchased supplies on account for the firm. He purchased several cameras, a computer, and other items which he placed on the firm account. Wally just smiled when Sam, the manager at the store, told Wally that he really appreciated the law firm's business. The next day Wally headed for the Caribbean and cannot be located. Sam later requests that XYZ firm pay the bill for Wally's purchases. The law firm, whose members had decided to continue the partnership after the dissolution resulting from Wally's resignation, refused on the basis that Wally was not a partner when the purchases were made. Sam says that he thought Wally was a partner and that he expects to be paid immediately. Which of the following is true regarding whether the law firm is liable for purchases made by Wally?

• A) The law firm is liable for the purchases because it had not provided notification to the office supply that Wally was no longer authorized to make purchases for the firm.
• B) The law firm is liable for the purchases because Wally's authority continued for seven days after his resignation.
• C) The law firm is liable for the purchases because Wally's authority continued for ten days after his resignation.
• D) The law firm is liable for the purchases only if Wally was treated inequitably during the winding-up process.
• E) The law firm is liable for the purchases only if Wally cannot be found within one year of the date the purchases were made.

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Definitions:

Transfer Price

The price charged for goods or services transferred between departments or divisions within the same company.

Variable Cost

A cost that varies directly with the level of output or production, such as raw materials or direct labor costs.

Division Delta

A specific division, unit, or segment within a larger organization, identified by the designation "Delta."

Transfer Price

The price at which goods and services are transferred between departments or divisions within the same company or between affiliated entities.