When a Partner Increases His or Her Share of the Partnership's

question 66

Multiple Choice

When a partner increases his or her share of the partnership's liabilities,the liability increase is treated as a:

• A)Money distribution.
• B)Money contribution.
• C)Recognition of income.
• D)Has no effect on the partner.

---

Definitions:

Effective Interest Rate

An adjusted interest rate that accurately reflects the cost of borrowing including fees and compounding.

Stated Rate

The annual interest rate declared on a loan or investment, not accounting for compounding or additional fees.

Effective Interest Method

A method used in accounting to allocate the interest income or expense over the relevant period, adjusting for the impact of discount or premium on the purchase of bonds.

Bond Discount

The difference between the face value of a bond and its selling price when the bond is sold for less than its face value.