In profit sharing ratio
In capital ratio
In pre-distribution capital ratio
Gaining ratio
Answer is Right!
Answer is Wrong!
The correct answer is: A. In profit sharing ratio.
The Garner v. Murray case established the rule that the deficiency of an insolvent partner’s capital is shared by the other partners in their profit sharing ratio. This means that the partners who are not insolvent are liable to contribute to the insolvent partner’s capital deficiency in proportion to their share of the partnership profits.
The other options are incorrect because:
- Option B, capital ratio, is not the correct ratio in which the deficiency of an insolvent partner’s capital is shared by the other partners. The correct ratio is the profit sharing ratio.
- Option C, pre-distribution capital ratio, is the ratio in which the partners’ capital accounts stood before the distribution of profits. This ratio is not relevant to the question of how the deficiency of an insolvent partner’s capital is shared by the other partners.
- Option D, gaining ratio, is the ratio in which the partners share the profits of the partnership after the distribution of capital. This ratio is also not relevant to the question of how the deficiency of an insolvent partner’s capital is shared by the other partners.