A Partnership Agreement Calls for Allocation of Profits and Losses

question 9

Multiple Choice

A partnership agreement calls for allocation of profits and losses by salary allocations, a bonus allocation, interest on capital, with any remainder to be allocated by preset ratios. If a partnership has a loss to allocate, generally which of the following procedures would be applied?

• A)Any loss would be allocated equally to all partners.
• B)Any salary allocation criteria would not be used.
• C)The bonus criteria would not be used.
• D)The loss would be allocated using the profit and loss ratios, only.

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Definitions:

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