Dennis Brown and Gregory Isaacs are partners in The Ragamuffins partnership. Its

agreement included the following terms:

Profit is to be shared in the same ratio as capital

Interest is to be paid on capital at 10%

Interest is to be charged on drawings at 5%

Dennis is to be paid a salary of $15,000 p.a.

Gregory is classified as a silent partner

The following extracts were available at the end of the year

	Dennis	Gregory	Total
Capital	300,000	200,000	500,000
Current Account	12,000	10,000	22,000
Drawings	40,000	30,000	70,000

The net income for the year is $270,000.

The classification of a silent partner means:

Question 22Answer

a.

The partner is not involved in the day to day activities of the business

b.

The partner carries out work undercover for the business

c.

The partner has not met the legal qualifications as a partner

d.

The public was not informed about the admission of the partner