Asked by Bryce Burns on May 11, 2024
Verified
In the liquidation of a partnership any partner who has a capital deficiency
A) has a personal debt to the partnership for the amount of the deficiency.
B) is automatically terminated as a partner.
C) will receive a cash distribution only on the basis of his or her income-sharing ratio.
D) is not obligated to make up the capital deficiency.
Capital Deficiency
A situation where a company's liabilities exceed its assets, indicating financial distress or bankruptcy risk.
Personal Debt
The total amount of money an individual owes to lenders, including loans, credit card debt, and mortgages.
Cash Distribution
The payment of earnings, or other financial assets, to shareholders or partners in a company or fund.
- Investigate the impact of lacking capital on the dissolution process of partnerships and the following obligations of partners.
Verified Answer
LW
Lindsey WashingtonMay 12, 2024
Final Answer :
A
Explanation :
In a partnership, the partners are jointly and severally liable for the partnership's debts. This means that if the partnership is unable to pay its debts, the partners are personally responsible for paying them. If a partner has a capital deficiency, it means that his or her share of the partnership's debts exceeds his or her share of the partnership's assets. In this case, the partner has a personal debt to the partnership for the amount of the deficiency, and is obligated to make up the shortfall.
Learning Objectives
- Investigate the impact of lacking capital on the dissolution process of partnerships and the following obligations of partners.
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