In Accounting for the Liquidation of a Partnership, Any Gain

question 171

Multiple Choice

In accounting for the liquidation of a partnership, any gain or loss on the realization of noncash assets should be allocated

• A) first to creditors and the remainder to partners.
• B) to the partners on the basis of their capital balances.
• C) to the partners on the basis of their profit-sharing ratio.
• D) only after all creditors have been paid.

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Definitions:

Options

Financial derivatives that give the buyer the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price within a certain period.

Held

When securities are retained in an investment portfolio without being sold.

Financial Engineering

Creating and designing securities with custom-tailored characteristics.

Securities

Securities are financial instruments that represent an ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership as represented by an option.