[Candy Company] Milton, Ava, and Hiro Own a Candy Company

question 45

Multiple Choice

[Candy Company] Milton, Ava, and Hiro own a candy company. The business is failing and Milton is declared bankrupt by the bankruptcy court. Ava wants to keep the business running because she is sure she can turn it around. Hiro tells her that, it's too late, the partnership is already over because of Milton. Ava tells him that no one has asked to end the partnership so they do not have to dissolve. The partnership debts include a loan to the bank, loans Ava made to the company, and the initial capital that all three partners invested. Milton has no money to pay any of their debts.
-Is Ava correct that they do not have to dissolve the partnership?

• A) No, the partnership has been dissolved by act of the court because Milton was adjudicated bankrupt.
• B) No, the partnership has been dissolved by operation of law because Milton was adjudicated bankrupt.
• C) No, the partnership has been dissolved by Milton because Milton was adjudicated bankrupt.
• D) Yes, because the partners have not agreed to end the partnership.
• E) Yes, because Ava wants to continue doing business.

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Definitions:

Joint Arrangements

Accounting term for arrangements between two or more parties who undertake an economic activity that is subject to joint control.

Equal Interests

A term usually indicating that all parties involved have the same level of stake or share in an asset, liability, or agreement.

Joint Control

The contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

Manage Risks

The process of identifying, assessing, and controlling threats to an organization's capital and earnings.