The Computation of a Safe Installment Payment for the XYZ

question 50

Multiple Choice

The computation of a safe installment payment for the XYZ partnership resulted in only partner Z receiving cash.Which of the following statements is correct?
I.Partner Z lent the partnership cash,and the partnership had to pay back the loan to Z before distributing cash to X and Y.
II.After assuming all noncash assets were potentially worthless and that assumed capital deficits created in X's and Y's capital balances were losses to be allocated to Z;Z's capital balance was the only capital balance left with a credit.

• A)I only
• B)II only
• C)Either I or II
• D)Neither I nor II

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Definitions:

Market Value

The ongoing rate for purchasing or selling a good or service in the marketplace.

Inventory Valuation Method

A system used by businesses to assess the cost of their inventory, affecting financial statements and taxation.

Gross Profit

The financial metric calculated by subtracting the cost of goods sold from the net sales, representing the profit from sales before deducting operating expenses.

LIFO

An inventory valuation method that assumes the last items placed in inventory are the first ones sold, standing for Last In, First Out.