Which of the Following Is TRUE of a Liquidation of a Partnership

question 84

Multiple Choice

Which of the following is TRUE of a liquidation of a partnership?

• A) It allocates the gain or loss on sale of assets to the partners' capital accounts based on the profit-and-loss-sharing ratio.
• B) The remaining cash after paying all liabilities are paid to the partners based on their profit-and-loss-sharing agreement.
• C) Before a business is liquidated, its books should not be adjusted or closed.
• D) It involves the selling of short-term liquid assets and does not involve the sale of fixed assets.

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Definitions:

Investment

The allocation of resources, usually money, in order to earn income or profit over time.

Partial Equity Method

An accounting method used when an investing company has significant influence over, but not full control of, another company, requiring the investor to record its share of profits.

Equity Method

The Equity Method is an accounting technique used to record investments in other companies, recognizing the income earned from the investment proportional to ownership.

Dividends

Cash disbursements issued to shareholders by a company, commonly originating from the organization's earnings.