When a Partnership Is Liquidated, the Assets Are Sold and the Cash

question 46

Multiple Choice

When a partnership is liquidated, the assets are sold and the cash realized is applied first to the:

• A) claims of creditors.
• B) partner with the largest investment.
• C) partners' equity accounts.
• D) partners according to their ownership interests.

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Definitions:

Profitability

Measures how much profit a company generates in relation to its revenues, assets, or equity, indicating its financial health and efficiency.

Debt

The total amount of money owed by an individual, company, or other entity to lenders, which can include loans, bonds, mortgages, and other forms of financial liabilities.

Liquidity

Liquidity refers to how easily an asset or security can be converted into cash without affecting its market price.