Drew,Elmer,and Frank are partners in the DEF partnership.The partnership is being dissolved.It has $200,000 in cash assets and it owes $410,000 to creditors.Profits and losses of the partners are shared equally,although Drew contributed $100,000 in capital;Elmer contributed $50,000 in capital;and Frank contributed $25,000 in capital.Which of the following is correct with regard to the responsibility of each partner?
A) Each partner is responsible for $70,000 of the money owed to creditors.
B) Elmer will have to contribute additional capital in order to settle the partnership affairs.
C) Drew will have to contribute additional capital in order to settle the partnership affairs.
D) All of these are correct.

Question

Quizplus · Accepted Answer

Since the profits and losses are shared equally among the three partners, each partner is responsible for 1/3 of the total debt ($410,000/3 = $136,667). However, Drew, who contributed twice as much capital as Elmer, will have to contribute an additional amount to ensure that the debts are paid off. Elmer, on the other hand, may not need to contribute any additional capital if his share of the cash assets is enough to cover his share of the debt. Therefore, option D is correct.

Drew,Elmer,and Frank Are Partners in the DEF Partnership