The articles of partnership of the firm of Wilson and Company
provide the following:
William Smith to contribute $50,000; to receive interest thereon at 13 percent per annum and to devote such
time as he may be able to give; and to receive 30 percent
of the profits.
John Jones to contribute $50,000; to receive interest on
same at 13 percent per annum; to give all of his time to
the business; and to receive 30 percent of the profits.
Henry Wilson to contribute all of his time to the
business and to receive 20 percent of the profits.
James Brown to contribute all of his time to the business and to receive 20 percent of the profits.
There is no provision for sharing losses. After six years of
operation, the firm is dissolved and wound up. No distributions to partners have been made since the partnership was
formed. The partnership assets are sold for $400,000 with a
loss of $198,000. Liabilities to creditors total $420,000. What
are the rights and liabilities of the respective parties? Explain.