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    Topic 4229

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    Richard mwana
    A limited partnership formed a video arcade with three partners, with one general partner contributing $2,000 and two limited partners each contributing $3,000. After one year and $10,000 in debts, the partnership dissolved. The general partner must first pay the creditors before distributing any remaining funds to the partners according to their partnership agreement.

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    Topic 4229

    Uploaded by

    Richard mwana
    15 views1 page
    A limited partnership formed a video arcade with three partners, with one general partner contributing $2,000 and two limited partners each contributing $3,000. After one year and $10,000 in debts, the partnership dissolved. The general partner must first pay the creditors before distributing any remaining funds to the partners according to their partnership agreement.

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    TOPIC 4229

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    A limited partnership formed a video arcade with three partners, with one general partner contributing $2,000 and two limited partners each contributing $3,000. After one year and $10,000 in debts, the partnership dissolved. The general partner must first pay the creditors before distributing any remaining funds to the partners according to their partnership agreement.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    15 views1 page

    Topic 4229

    Uploaded by

    Richard mwana
    A limited partnership formed a video arcade with three partners, with one general partner contributing $2,000 and two limited partners each contributing $3,000. After one year and $10,000 in debts, the partnership dissolved. The general partner must first pay the creditors before distributing any remaining funds to the partners according to their partnership agreement.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    TOPIC 4229

    Description

    Suppose that Katherine, Brianna, and Paige have formed a limited partnership to operate a video

    arcade. Katherine is the general partner. She has contributed $2,000 and her time to get the operation

    running. Brianna and Paige, the limited partners, have each contributed $3,000. After one year of

    operation, the arcade has debts of $10,000, and the three partners decide to discontinue their business

    and the limited partnership. Brianna and Paige want their investment returned to them. Who should

    Katherine, who is winding up the business, pay first, Brianna and Paige, or the creditors? How much will

    Brianna and Paige receive? How about Katherine?

    ANSWER.

    Katherine should pay creditors first. The remaining amount should/will be shared among the partners

    according to the partnership agreement.

    Explanation.

    When the company is being wound up, the creditors have the priority of getting paid. If a company has

    secured creditors, they will be paid first and then the unsecured creditors will be paid next including the

    employees if there are any. Therefore, Katherine will pay the debt of $10,000 first. Now, the remaining

    amount will be shared among the partners according to their agreement. If they had set an agreement

    to share the profit or loss according to how much each contributed, they will receive an amount equal to

    their ratio of contribution. However, if there was no agreement during the time of forming the

    partnership, then, the remaining amount, after creditors are paid will be shared equally among the

    three partners. 

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