Which of the Following Is False a Regarding a Partner's

question 41

Multiple Choice

Which of the following is false a regarding a partner's deficit balance?

• A) A partner cannot refuse to make contributions to cover their deficit balance.
• B) Deficits can occur when the partnership has incurred significant operating losses.
• C) Deficits can occur when the sale of noncash assets during the liquidation process results in material losses.
• D) The partner with a deficit balance should contribute assets to cover the deficit balance.
• E) The other partners may have to absorb the deficit balance.

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Definitions:

Discount Rate

In discounted cash flow examination, the discount rate is used to evaluate the contemporary value of future cash inflows.

Incremental Cost Approach

A decision-making process that focuses on the changes in total cost due to a change in activity or a decision.

Payback Period

The length of time required to recover the cost of an investment, calculated by dividing the initial investment by the annual cash inflow.

Discount Rate

The interest rate applied in determining the current valuation of future cash flows via discounted cash flow analysis.