Derek and his friend Tim own a bicycle shop. Tim works at the store full-time, whereas Derek only works on the weekends. Derek invested $5,000 in the business to get it started, plus he owned the building the shop is housed in, which is worth $50,000. Derek invested $15,000 in the business. Which of the following explains why Derek and Tim will split this year's profits of $130,000 with Tim getting 40% of the profits and Derek getting 60%?
A) Their business is a corporation, and they will split the profits according to each owner's percentage of ownership.
B) Their business is a corporation, and Tim's investment in the company is equal to 40%.
C) Their business is a partnership, and Tim works more hours at the shop than Derek.
D) Their business is a partnership, and they will distribute the profits according to the terms of the partnership agreement.

Question

Quizplus · Accepted Answer

The Answer of Derek and his friend Tim own a bicycle shop. Tim works at the store full-time, whereas Derek only works on the weekends. Derek invested $5,000 in the business to get it started, plus he owned the building the shop is housed in, which is worth $50,000. Derek invested $15,000 in the business. Which of the following explains why Derek and Tim will split this year's profits of $130,000 with Tim getting 40% of the profits and Derek getting 60%?
A) Their business is a corporation, and they will split the profits according to each owner's percentage of ownership.
B) Their business is a corporation, and Tim's investment in the company is equal to 40%.
C) Their business is a partnership, and Tim works more hours at the shop than Derek.
D) Their business is a partnership, and they will distribute the profits according to the terms of the partnership agreement.

Derek and His Friend Tim Own a Bicycle Shop