Davis and Shipman founded a partnership under the name of Shipman & Davis Lumber Company. Four years later, the partnership was dissolved by written agreement. Notice of the dissolution was published in a newspaper of general circulation in Merced County, where the business was conducted. No actual notice of dissolution was given to firms that previously had extended credit to the partnership. By the dissolution agreement, Shipman, who was to continue the business, was to pay all of the partnership’s debts. He continued the business as a sole proprietorship for a short time until he formed a successor corporation, Shipman Lumber Servaes Co. After the partnership’s dissolution, two firms that previously had done business with the partnership extended credit to Shipman for certain repair work and merchandise. The partnership also had a balance due to Valley Company for a prior purchase. Five months later, two checks were drawn by Shipman Lumber Servaes Co. and accepted by Valley as partial payment on this debt. Credit Bureaus of Merced County, as assignee of these three accounts, sued the partnership as well as Shipman and Davis individually. Does the dissolution of the partnership relieve Davis of personal liability for the accounts? Explain.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is 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, drawings of a partner, etc.
Davis and Shipman founded a partnership under the name of Shipman & Davis Lumber Company. Four years later, the partnership was dissolved by written agreement. Notice of the dissolution was published in a newspaper of general circulation in Merced County, where the business was conducted. No actual notice of dissolution was given to firms that previously had extended credit to the partnership. By the dissolution agreement, Shipman, who was to continue the business, was to pay all of the partnership’s debts. He continued the business as a sole proprietorship for a short time until he formed a successor corporation, Shipman Lumber Servaes Co. After the partnership’s dissolution, two firms that previously had done business with the partnership extended credit to Shipman for certain repair work and merchandise. The partnership also had a balance due to Valley Company for a prior purchase. Five months later, two checks were drawn by Shipman Lumber Servaes Co. and accepted by Valley as partial payment on this debt. Credit Bureaus of Merced County, as assignee of these three accounts, sued the partnership as well as Shipman and Davis individually. Does the dissolution of the partnership relieve Davis of personal liability for the accounts? Explain.
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