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Prairie Bank has extended an open line of credit to the Zack, Nathan, and Sara Partnership at an interest rate of 4%

Accounting Aug 07, 2020

Prairie Bank has extended an open line of credit to the Zack, Nathan, and Sara Partnership at an interest rate of 4%. Throughout the years, the partnership has used the credit line many times. In May 2020, the partnership agreed to dissolve and published a notice of dissolution in the newspaper, which no one at the bank saw. After the notice was published, Zack decided he needed $20,000 to start up his new business and used the partnership’s line of credit with Prairie Bank. Who is responsible to pay the loan?

A. Only Zack, since the partnership is dissolved.

B. All the partners since Zack had apparent authority to borrow.

C. Only Zack, since the bank received constructive notice.

D. All the partners since the bank received constructive notice.

Expert Solution

Correct option is B .All the partners since Zack had apparent authority to borrow.

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