Reference - Grooming Losses

question 85

Multiple Choice

Reference - Grooming Losses. Wally, Beverly, and Matthew formed a partnership to groom dogs. Unfortunately, the business did not go as well as expected and the partnership incurred some losses. The articles of partnership did not allocate profits or losses. Matthew claimed that he should not have to share in losses because he had groomed more dogs than anyone. Matthew also claimed that although the partnership did not reference compensation for additional duties, he was entitled to compensation because of his excessive work. Beverly claimed that she should not have to share in losses because she contributed more capital than did either of the others. Wally claimed that he should not have to cover the losses because both Beverly and Matthew had been hiding the books from him. He demanded to inspect the books and also to a review and listing of all partnership assets and profit. Beverly and Matthew denied that Wally was entitled to a review of the books and stored them in a safe deposit to which only Beverly had a key. They claimed complete innocence of any wrongdoing. Which of the following is correct regarding how the partnership losses should be allocated?

• A) In proportion to the sharing of profits.
• B) In proportion to the amount of work done in the business, with a partner who contributed more work being allocated less in the way of losses.
• C) In proportion to the right to share in management.
• D) In proportion to the capital contribution, with partners who contributed more capital being allocated less in the way of losses.
• E) The court will allocate losses based upon the amount of fault of each partner resulting in said losses.

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