Under Which of the Following Circumstances Would a Partnership Terminate

question 23

Multiple Choice

Under which of the following circumstances would a partnership terminate and close its tax year?

• A)Divorce of a partner
• B)Cessation of business activities by the partnership
• C)Entry of a new partner
• D)Distribution of property to a 10 percent partner in complete termination of the partner's interest in the partnership
• E)None of the above

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Definitions:

Accounts Payable

Short-term liabilities a company owes to its creditors or suppliers, expected to be settled within one year.

Bank Loan

A sum of money borrowed from a bank that needs to be repaid with interest.

Accrual

An accounting method that records revenues and expenses when they are incurred, regardless of when cash transactions occur.

Spontaneous Financing

Financing that arises naturally from the normal operations of a company, such as trade credit that increases automatically with increases in sales.