Question: Please explain. Should we include the 80,000 debt in calculation? The capital balances, prior to the liquidation of the XYZ partnership, were as follows: X,

Please explain. Should we include the 80,000 debt in calculation?

The capital balances, prior to the liquidation of the XYZ partnership, were as follows: X, Capital $ 130,000 Y, Capital $ 130,000 Z, Capital $ 100,000 X, Y, and Z share profits and losses in the ratio of 5:3:2. As a result of a loan, the partnership owes Y $80,000. Using the information above, which partner has the highest Loss Absorption Potential (LAP) prior to liquidation?

Both X and Y

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