Carolee, Joanna, and Ellen form Capital City Partnership. Carolee contributes expertise; Joanna, $15,000; and Ellen, $20,000 . After a year, Joanna adds $12,000 as a loan. Ten years later, Capital owes $44,000 to creditors, total assets are $112,000, and the partners decide to dissolve the business. How will the assets be distributed under the UPA, and what will each partner receive?

Answer 1

First, creditors will receive their $44,000 . Then, unless the partners had agreed otherwise, Joanna will be repaid her loan of $12,000 . Next the partners would receive their capital contributions and then share any profits equally. Profits are calculated as follows: Gross assets of $112,000 minus liabilities ($44,000 to creditors, $12,000 for the loan, and $35,000 in capital contributions) to equal $21,000 . Joanna would receive a total of $34,000 ($12,000 for the loan plus $15,000 capital plus $7,000 profits). Ellen will receive her capital of $20,000 plus profits to total $27,000 . Carolee will simply get her share of the profits or $7,000.