Unlimited liability means the business is responsible for the majority of debt it incurs, and filing bankruptcy is out of the question the business is responsible for the debt it incurs. if the business cannot pay its bills, the debt burden transfers to the owner(s), and he/she/they are liable for all debt the business is responsible for the debt. if the business cannot pay, the company files bankruptcy. the debt does not fall on the shoulders of individual owners. they are safe from liability that all forms of business are responsible for all the debts a business incurs in its everyday operations

Powell company began the 2018 accounting period with $40,000 cash, $86,000 inventory, $60,000 common stock, and $66,000 retained earnings. during 2018, powell experienced the following events: sold merchandise costing $58,000 for $99,500 on account to prentise furniture store. delivered the goods to prentise under terms fob destination. freight costs were $900 cash. received returned goods from prentise. the goods cost powell $4,000 and were sold to prentise for $5,900. granted prentise a $3,000 allowance for damaged goods that prentise agreed to keep. collected partial payment of $81,000 cash from accounts receivable. required record the events in a statements model shown below. prepare an income statement, a balance sheet, and a statement of cash flows. why would prentise agree to keep the damaged goods?