Which of the Following Procedures Is Acceptable When Accounting for a Deficit

question 21

Multiple Choice

Which of the following procedures is acceptable when accounting for a deficit balance in a partner's capital account during partnership liquidation,if the partner with a negative capital balance is personally insolvent?

• A)The partner with a negative capital balance must contribute personal assets to the partnership that are sufficient to bring the capital account to zero.
• B)The negative capital balance may be absorbed by those partners having a positive capital balance according to the residual profit and loss sharing ratios that apply to all the partners.
• C)The negative capital balance may be absorbed by those partners having a positive capital balance according to the residual profit and loss sharing ratios that apply to those partners having positive balances.
• D)The partner with a negative capital balance must contribute personal assets to the partnership that are sufficient to bring the capital account to the same level of the other partners' capital accounts.

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Definitions:

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