a. If both Hammond and Winwood are personally insolvent, how much money must Ber

Question

a. If both Hammond and Winwood are personally insolvent, how much money must Berry contribute to this partnership?

b-1. If only Winwood is personally insolvent, how much money must Hammond contribute?

b-2. If only Winwood is personally insolvent, how will Hammond's contribution (funds) be disbursed?

c. If only Hammond is personally insolvent, how much money should Anderson receive from the liquidation?

Anderson (40% of profits and losses) $ 40,900 Berry (10%) 12,000 Hammond (20%) (38,000 ) (deficit) Winwood (30%) (42,000 ) (deficit)

Explanation / Answer

As per Garner v/s. Murray rule, the loss of the partner should be borne by the remaining in the ratio of their capital accounts (assuming it is fixed capital ratio).

a) The amount contributed by Berry will be $6,147.

b-1) If only Winwood becomes insolvent, then his deficit will be divided among the 3 partners in the ratio of their capital as per Ganer v/s. Murray rule which will be 409:120:380. The amount that Hammond has to contribute is $55,558.

b-2) If ony Winwood is personally insolvent then Hammond's contribution (funds) will be disbursed among Anderson and Berry in their capital ratio i.e. 409:210. Continuing with the above table

c) If only Hammond is insolvent then Anderson should receive $45,476.

Particulars Anderson Berry Hammond Winwood Balances 40,900 12,000 (38,000) (42,000) Less: Deficit of Winhood distributed among solvent partners in the ration of 409:120 (32,473) (9527) 42000 Less: Deficit of Hammond distributed among solvent partners in the ration of 409:120 (29,380) (8620) 38000 Total (20,953) (6,147) - -

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