Question

Turner, Roth, and Lowe are partners who share income and loss in a 2:3:5 ratio (in percents: Turner, 20%; Roth, 30%; and Lowe, 50%). The partners decide to liquidate the partnership. Immediately before liquidation, the partnership balance sheet shows total assets, $138,000; total liabilities, $88,000; Turner, Capital, $3,500; Roth, Capital, $14,500; and Lowe, Capital, $32,000. Cash received from selling the assets was sufficient to repay all but $33,000 to the creditors. Assume that the Turner, Roth, and Lowe partnership is a limited partnership. Turner and Roth are general partners and Lowe is a limited partner. How much should each partner contribute to cover the remaining capital deficiency of $33,000? (Do not round intermediate calculations. Losses and deficits amounts to be deducted should be entered with a minus sign.)

Answer 1

Answer:

The capital deficiency of $33,000 will be shared between Turner and Roth in the proportion of their income and loss sharing ratio of 2:3.

Turner will need to further contribute $13,200 ($33,000 x 2/5)

Roth will contribute $19,800 ($33,000 x 3/5)

Lowe is a limited partner and will not contribute to the capital deficiency.

Explanation:

Lowe as a limited partner is a part-owner of the partnership but his liability for the firm's debts cannot exceed $32,000 being the amount that has invested in the company.  As a silent partner, Lowe does not participate in the management of the company.

The Limited Partnership of Turner, Roth, and Lowe is a partnership consisting of general partner(s) like Turner and Roth, who manage the business and have unlimited personal liabilities for the debts and obligations of the Limited Partnership and Lowe as the limited partner.  Whereas, Turner and Roth are in charge of the management of the company, Lowe is a silent partner.