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Virginia and Kathy are in the business of buying and selling antiques in a downtown...

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Accounting

Virginia and Kathy are in the business of buying and selling antiques in a downtown Kirksville office building they rent. They both contribute all the antiques they own to the business and agree to divide the profits on the basis of their capital contributions. They agree that Virginia's antiques are worth $50,000 and Kathy's antiques are worth $100,000. They do not have anything in writing, don't have any agreement as to division of losses and don't make any filings with the Secretary of State. As to these facts, which statement is true?

A.

This arrangement does not qualify as a general partnership because the partnership agreement must be in writing.

B.

Profits will be divided equally despite their oral agreement because the default rule providing for an equal division of profits will apply unless a partnership agreement providing a different division is reduced to writing.

C.

Losses will be divided according to their capital contributions because the default rule is that absent an agreement, losses will be divided in the same manner as profits.

D.

Losses will be divided equally because there is no agreement as to losses.

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