, Tim and Una formed a partnership, under the Partnership Act 1890, to run a pottery business trading under the name STU Potteries. On formation, Sim introduced £6,000 into the business, Tim introduced £3,000 and Una introduced £1,000. All of them took an active part in the operation of the business and the partnership agreement stated that all profits and losses should be divided in proportion to the capital contribution. However, as Una was the person who would actually be making the pottery, it was agreed that she would not be liable for any more than her initial contribution towards any future debts. After some time, Sim provided the partnership with an advance of £1,000 in order to sustain the operation of the business. Unfortunately, the business is not successful and has made significant losses. Today the partners decide that it would be best to stop trading and dissolve the partnership. Its assets are worth £5,000 and its external debts are £9,000.
Sim, Tim and Una formed a
business trading under the name STU Potteries. On formation, Sim introduced £6,000 into
the business, Tim introduced £3,000 and Una introduced £1,000. All of them took an active
part in the operation of the business and the partnership agreement stated that all profits
and losses should be divided in proportion to the capital contribution. However, as Una was
the person who would actually be making the pottery, it was agreed that she would not be
liable for any more than her initial contribution towards any future debts. After some time,
Sim provided the partnership with an advance of £1,000 in order to sustain the operation of
the business.
Unfortunately, the business is not successful and has made significant losses. Today the
partners decide that it would be best to stop trading and dissolve the partnership. Its assets
are worth £5,000 and its external debts are £9,000.
Question
Work out how much each partner will have to contribute to paying the external debts;
Question
Make a decision as to how Sim’s advance of £1,000 will be dealt with.
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