Two of your friends, Sony and Ted, are planning on starting a new business. Knowing you are studying accounting they come to you for advice as to the best business form they should use for their business. They want to be able to raise capital; they also want protection against claims by creditors. As an accounting student:

a. What business form would you recommend to Sony and Ted for their business?

b. Why?

The partnership agreement of Gibbs and Reed has the following provisions: 1. Salary allowances are $20,000 for Gibbs and $30,000 for Reed. 2. No interest is given on the partners capital balances. 3. Any income/loss greater than the salary allowances is divided using a 2:3 ratio. Revenues of $130,000 and expenses of $62,000 resulted in net income for the first year of operations of $68,000. Calculate the net income distributed to each partner.