Question

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

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?

	a. Berry's contribution b-1. Hammond's contribution b-2. Creditors Anderson Berry c. Anderson should receive

Answer 1

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.

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)	-	-

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.

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 409:120:380	(18,898)	(5,545)	(17,558)	42000
Total	22,002	6455	(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

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 409:120:380	(18,898)	(5,545)	(17,558)	42000
Total	22,002	6455	(55,558)	-
Disbursement of funds of Winwood in 409:120	(42,955)	(12,603)	55,558	-

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 Hammond distributed among solvent partners in the ration of 409:120:420	(16,377)	(4,805)	38000	(16,818)
Total	24,523	7,195	0	(58,818)
Less: Cash contributed by Winwood in the ratio of 409:120	(45,476)	(13,342)	-	-