In a Partnership Agreement, If the Partners Agreed to an Interest

question 49

Multiple Choice

In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each partner's investment, the interest allowance:

• A) Is ignored when earnings are not sufficient to pay interest.
• B) Can make up for unequal capital contributions.
• C) Is an expense of the business.
• D) Must be paid because the partnership contract has unlimited life.
• E) Legally becomes a liability of the general partner.

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Definitions:

Herzberg's Two-Factor Theory

A motivational theory that divides factors in the workplace into two categories: hygiene factors, which if inadequate cause dissatisfaction, and motivators, which can lead to satisfaction.

Expectancy Theory

A motivational theory suggesting that people are motivated to perform behaviors if they believe that such behaviors will lead to desired outcomes.

Individualism

A social theory favoring freedom of action for individuals over collective or state control.

Full Engagement

The complete involvement and enthusiastic participation of an individual in a task or activity, often leading to higher productivity.