Which of the following statements about the liquidation of a partnership is TRUE?
A)The final cash distribution is always based on equal shares.
B)The final cash distribution is based on the partners' capital account balances.
C)Gains and losses from the disposal of assets are always distributed to the partner's capital accounts based on their respective percentage of total capital.
D)The final cash distribution is always based on the profit sharing formula specified in the partnership agreement.

Question

Quizplus · Accepted Answer

When a partnership is liquidated, the final cash distribution is based on the partners' capital account balances. This means that each partner receives a portion of the remaining assets based on the amount they contributed to the partnership. The profit sharing formula in the partnership agreement may impact the size of each partner's capital account balance, but it is not the sole determining factor in the final distribution. Gains and losses from the disposal of assets may impact the total amount available for distribution, but they are not distributed based on the partners' percentage of total capital. Therefore, options A, C, and D are not correct.

Which of the Following Statements About the Liquidation of a Partnership