Gar, Mur and Wil were partners in the firm, sharing profits and losses equally. The capitals are not equal. There was no partnership deed. The firm dissolved on June $30,2020.$ The position was as follows, after dissolution:

Balance Sheet

As at June $30,2020$

$ $

Assets

Cash $1916$

Wil Capital $263$

Loss on realisation $635$

Total Assets $2814$

Liabilities

Gar Capital $2,500$

Mar Capital $314$

Total liabilities $2814$

Will became insolvent and could not pay anything against the capital deficiency.

Required:

A$.$ Explain the decision that may be taken due to Will$$s insolvency. Show workings to

support your response. $(8$ marks$)$

B$.$ In such a case, how the deficiency would be treated by the insolvent partner$$s capital account? $(2$ marks$)$

C$.$ Prior to the Garner VS$.$ Murray$$s rule, Mur had raised an objection and claimed that the loss is a capital loss and not a business loss. Therefore such loss due to capital deficiency of a partner to be borne in capital ratio and not in profit sharing ratio. In court, Mur got the decision in his favour. Explain FOUR $(4)$ points in the Garner Vs Murray decision. $(10$ marks$)$