Question

Dione is a general partner who owns 50% interest in Love First Enterprises. Sammy is a...

Dione is a general partner who owns 50% interest in Love First Enterprises. Sammy is a limited partner who owns $50%. The partnership has $50,000 in recourse liabilities and $20,000 in non recourse liabilities. What is Dione's total share of liabilities?

a) $35,000

b) $45,000

c) $60,000

d) $70,000

I had a study question that suggests that the answer $60,000 would not be correct. I got the answer wrong when I used the same concept to get the answer $60,000.

Can someone please answer and explain the answer.

Thank you.

Homework Answers

Answer #1

Answer:

According to the question recourse liabilities = $50,000
Non-recourse liabilities = $20,000

As sammy is a limited partner. So recourse liabilities cannot be allocate to them. They do not need to contribute additional money to the business. Only Non-recourse liabilities are shared with partnership projects.
So, general partners share of non-recourse liability = (50% of $20,000) = $10,000
Hence, Dione's total share of liabilities
=$50000 + $10000
=$60,000

Note: Only $50,000 is considered as recourse liabilities and $20,000 as non-recourse liabilities in the question information.

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