Fundamental Accounting Principles 22th Edition by John Wild ,Ken Shaw,Barbara Chiappetta

Exercise 31

Doctors Mobey, Oak, and Chesterfield have been in a group practice for several years. Mobey and Oak are family practice physicians, and Chesterfield is a general surgeon. Chesterfield receives many referrals for surgery from his family practice partners. Upon the partnership's original formation, the three doctors agreed to a two-part formula to share income. Every month each doctor receives a salary allowance of $3,000. Additional income is divided according to a percent of patient charges the doctors generate for the month. In the current month, Mobey generated 10% of the billings, Oak 30%, and Chesterfield 60%. The group's income for this month is $50,000. Chesterfield has expressed dissatisfaction with the income-sharing formula and asks that income be split entirely on patient charge percents.
Required
1. Compute the income allocation for the current month using the original agreement.
2. Compute the income allocation for the current month using Chesterfield's proposed agreement.
3. Identify the ethical components of this partnership decision for the doctors.