Answered: 5. Kraft is a limited partner of…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter19: The Basic Tools Of Finance

Section: Chapter Questions

Problem 6PA

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5. Kraft is a limited partner of Johnson Enterprises, a limited partnership. As provided in the limited partnership
agreement, Kraft decided to leave the partnership and
demanded that her capital contribution of $20,000 be
returned. At this time, the partnership assets were
$150,000 and liabilities to all creditors totaled $140,000.
The partnership returned to Kraft her capital contribution of$20,000.
a. What liability, if any, does Kraft have to the creditors
of Johnson Enterprises?
b. If Johnson Enterprises had been formed as a limited
liability company, what liability, if any, would Kraft
have to the creditors of Johnson Enterprises?

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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