David, Ed, and Fred Are Partners in the DEF Partnership

question 2

Multiple Choice

David, Ed, and Fred are partners in the DEF partnership.The partnership is being dissolved, having $200,000 in assets and owing $410,000 to creditors.David contributed $100,000 in capital; Ed contributed $50,000 in capital; and Fred contributed $25,000 in capital.Profits are shared equally.Which of the following is correct with regard to the responsibility of each partner under the UPA?

• A)The partners will bear losses equally.
• B)The partners will bear losses in the proportion of their relative capital contributions.
• C)If Ed refuses to contribute to covering the loss and he is out of the jurisdiction, David and Fred must contribute the additional amount necessary to pay DEF's liabilities in the relative proportion of their capital contributions.
• D)Both (b) and (c).

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Definitions:

High-low Method

A technique in accounting used to estimate variable and fixed cost components of a cost by analyzing the highest and lowest activity levels.

Monthly Fixed

Regular, consistent expenses that a business incurs each month regardless of its operational volume, such as rent or salaries.

Lubrication Cost

Expenses associated with the lubrication of machinery and equipment in a manufacturing or production process.

Least-squares Regression

A statistical method used to determine the line of best fit by minimizing the sum of the squares of the differences between observed and predicted values.