Sid, Bailey, Brian, and Rick formed a general partnership to operate a Chinese restaurant. Their written partnership agreement provided that the profits would be divided so that Sid would receive 40%, Bailey, 30%, Brian, 20%, and Rick 10%. There was no provision in the agreement about how to allocate losses.

Answer the following questions:

1) In the first year, Bill sued the partnership getting a judgment of $100,000. From whom can Bill collect the judgment? Can he choose which of them to come after? Is there a particular order that he should pursue?

2) If in the second year, Bailey paid the entire $100,000 to Bill, what rights does she have? Be specific.

3) At the end of the fifth year, the partnership had a loss of $200,000. The capital accounts of the partners before allocation of the loss was Sid, $120,000, Bailey, $100,000,Brian $75,000, and Rick $11,000. What would be the balance in the capital account of each partner after allocation of the loss? Be sure to show and clearly label your work.

4) At the end of the fifth year, the partnership decided to terminate. After all assets had been sold and all liabilities paid, the partnership was left with a cash balance of $106,000. Using the ending capital account balances from question #3, how much should each partner receive assuming that Rick refuses to make any further contribution to the partnership? Hint: if any partner has a deficit in his/her capital account at the time of winding up, the deficit is treated as a loss to be allocated per the partnership agreement to the remaining partners. Be sure to show and clearly label all your work.