Joe RNotified His Partners in Writing That He Would Be Retiring

question 60

Multiple Choice

Joe R.notified his partners in writing that he would be retiring from the business partnership at the end of 2013.It was acknowledged and agreed upon and,at year-end,the remaining partners paid him for his interest in the partnership.In February 2014,one of the remaining partners misapplied some trust funds that a long-time client had placed in the care of the partnership for the purchase of a hotel.The partnership was sued,but the assets of the partnership were not sufficient to satisfy the judgment.The successful plaintiff went against the personal assets of the partners,including those of Joe R.What is the likely outcome?

• A)Joe R.is not liable because he had retired from the partnership at year-end and had properly notified his partners.
• B)Joe R.is not liable because he had nothing whatsoever to do with the misapplication of the trust money.
• C)Joe R.is not liable since he was not a partner when the misapplication happened.
• D)Joe R.is only liable for his share of the losses even if the other partners don't have the assets to pay.
• E)Joe R.is liable if he failed to give proper notice to outsiders,namely,the long-time client whose funds were misapplied.

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Definitions:

Estimated Life

The expected duration or operational lifespan of an asset, determining how long it will be useful and depreciated in accounting records.

Salvage Value

The estimated value that an asset will realize upon its sale at the end of its useful life, also considered in depreciation calculations.

Asset Improvements

Enhancements or upgrades made to a company's assets to increase their efficiency, productivity, or value.

Ordinary Maintenance

Ordinary maintenance involves the routine upkeep and repairs necessary to maintain assets in their current condition, without significantly enhancing their value or extending their life.