The partnership of Willis and Diaz, CPAs, has 200 partners and 1,500 staff professionals. Each partner shares equally in partnership income. Assume that the average income for partners in CPA firms across the country is $260,000 per year, and the average income for staff professionals is $75,000 per year. The partnership income statement for the year is as follows:
|
Revenues |
|
$200,000,000 |
|
Staff professional salaries |
$120,000,000 |
|
|
Nonprofessional salaries |
18,000,000 |
|
|
Supplies |
1,000,000 |
|
|
Travel |
2,000,000 |
|
|
Litigation losses |
15,000,000 |
156,000,000 |
|
Net income |
|
$ 44,000,000 |
The total partnership capital balance is $20,000,000 for 200 partners or $100,000 per partner.
a. Evaluate the financial performance of the partnership from a partner’s perspective. That is, if you were a partner in this firm, would you be satisfied or dissatisfied with partnership performance? Support your answer.
b. What are some explanations for the partnership’s performance.