Accounting 25th Edition by Carl Warren, James Reeve, Jonathan Duchac

Exercise 5

Josiah Barlow, Patty DuMont, and Owen Maholic are contemplating the formation of a partnership. According to the partnership agreement, Barlow is to invest $60,000 and devote one-half time, DuMont is to invest $40,000 and devote three-fourths time, and Maholic is to make no investment and devote full time. Would Maholic be correct in assuming that, since he is not contributing any assets to the firm, he is risking nothing Explain.