Shannon Has Just Become a Partner in a & R

question 36

Multiple Choice

Shannon has just become a partner in A & R Accounting Partnership.Her capital contribution is $10,000,which she paid from her savings.Which of the following is correct with respect to Shannon's liability for partnership obligations?

• A) Shannon has no liability for partnership debts that existed at the time of her admission as a partner.
• B) Shannon is liable only to the extent of her capital contribution for partnership debts that occur after her admission as a partner.
• C) Shannon has unlimited personal liability for all partnership debts regardless of whether they were incurred before or after she became a partner.
• D) Shannon has unlimited personal liability for all partnership obligations that occur after she became a partner;she has liability to the extent of her capital contribution for obligations that existed at the time she became a partner.

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Definitions:

Operating Activities

The day-to-day activities of a business related to producing and selling its product, providing services, or other activities that are not investing or financing.

Common Size Income Statement

An income statement in which each line item is expressed as a percentage of sales revenue, facilitating comparison across companies or periods.

Percent of Assets

A measure or indicator expressed as a percentage of a company's total assets.

Interest Coverage Ratio

A financial metric used to determine how easily a company can pay interest on outstanding debt with its current earnings before interest and taxes.