Tim and Darby Are Equal Partners in the TD Partnership

question 248

True/False

Tim and Darby are equal partners in the TD Partnership. Partnership income for the year is $60,000. Tim needs cash in order to pay tax on his share of the partnership income, but Darby wants to leave the cash in the partnership for expansion. If the partners agree, it is acceptable for TD to distribute $8,000 to Tim, and no cash or other property to Darby.

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Definitions:

Budget

An estimated financial plan for a defined period, often one year, detailing projected income and expenditures and guiding financial decision-making.

Activity Base

A measure used for allocating costs to specific activities, such as machine hours or labor hours, that drives the incurrence of costs.

Service Department Expenses

Costs incurred by the departments within an organization that support but do not directly participate in the production or delivery of goods and services.

Activity Base

A measure used in costing that drives the cost of activities, typically used in activity-based costing.