John, Samuel, and Jim Are General Partners in the Development

question 36

Multiple Choice

John, Samuel, and Jim are general partners in the development of an electric car. Jim pours all his money into the project, but it never seems to work out. Eventually the partnership and Jim cannot meet their daily obligations, and the partnership is dissolved. Jim files for bankruptcy. If the partnership assets are insufficient to pay all claims against the partnership:

• A) the trustee in bankruptcy must seek recovery of the deficiency first from John and Samuel.
• B) Jim is released from liability because of the bankruptcy proceedings.
• C) Jim's personal assets are not available for the partnership debts because he has limited liability.
• D) the bankruptcy court must follow the doctrine of marshaling of assets.

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Definitions:

Interest

The cost of borrowing money or the return on investment for the lender or investor.

Original Capital

Original capital refers to the initial amount of money invested in a business or project, used to start operations and acquire necessary resources.

Interest

The cost of borrowing money, paid by the borrower to the lender, typically expressed as an annual percentage of the loan amount.

Capital Account

An account on the balance sheet representing the owners' or shareholders' equity, including funds contributed by investors and retained earnings.