Which One of the Following Statements Is Correct

question 36

Multiple Choice

Which one of the following statements is correct?

• A) If a partner of a liquidating partnership is unable to pay a capital account deficit, the deficit is absorbed by the other partners in the profit and loss ratio of those partners.
• B) Gains and losses from the sale of noncash assets are divided in the ratio of the partners' capital account balances if there is no income-sharing plan in the partnership contract.
• C) A loan receivable from a partner is added to the partner's capital account balance in the preparation of a cash distribution plan.
• D) Partners may not receive any cash before partnership creditors receive cash when liquidating a partnership.
• E) All cash payments to partners are made using their profit and loss ratio when liquidating the partnership.

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Definitions:

Inventory Cost

The total cost associated with holding and managing inventory, including storage, insurance, and obsolescence.

Building

A structure with a roof and walls, such as a house or factory, used for living, working, storage, or other purposes.

Scarce Resources

Resources that are limited in availability and cannot satisfy all wants and needs due to their limited supply.

Economics

The social science that studies how individuals, governments, firms, and nations make choices on allocating scarce resources to satisfy their unlimited wants.