When a Partnership Is Insolvent and a Partner Has a Deficit

question 1

Multiple Choice

When a partnership is insolvent and a partner has a deficit capital balance, that partner is legally required to:

• A) declare personal bankruptcy.
• B) initiate legal proceedings against the partnership.
• C) contribute cash to the partnership.
• D) deliver a note payable to the partnership with specific payment terms.
• E) None of the above. The partner has no legal responsibility to cover the capital deficit balance.

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Definitions:

Cash Dividends

Payments made by a company out of its profits to its shareholders, distributing cash among them.

$70 Commission

A specific fee or payment of $70 made to an agent or employee for facilitating a sale or service.

Outstanding Shares

Stocks that a corporation has distributed and are currently owned by investors, encompassing both members of the general public and internal stakeholders of the company.

Net Income

The company's net income following the deduction of all costs, taxes, and losses.