1. In a partnership liquidation the realization losses result in a debit balance in one partners’ capital account. If this partner fails to contribute personal assets to make up this deficit, how should the debit balance be handled by the partners? a. It should be written off against partnership profits like any other bad debt. b. It should be allocated to all the partners in their profit and loss ratio. c. It should be allocated to the remaining partners in their remaining P and L ratio. d. It should be set up as a receivable and turned over to a collection agency.
1. In a partnership liquidation the realization losses result in a debit balance in one partners’ capital account. If this partner fails to contribute personal assets to make up this deficit, how should the debit balance be handled by the partners? a. It should be written off against partnership profits like any other bad debt. b. It should be allocated to all the partners in their profit and loss ratio. c. It should be allocated to the remaining partners in their remaining P and L ratio. d. It should be set up as a receivable and turned over to a collection agency.
Chapter21: Partnerships
Section: Chapter Questions
Problem 6BCRQ
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Question
1. In a partnership liquidation the realization losses result in a debit balance in one partners’ capital account. If this partner fails to contribute personal assets to make up this deficit, how should the debit balance be handled by the partners?
a. It should be written off against partnership profits like any other bad debt .
b. It should be allocated to all the partners in their profit and loss ratio.
c. It should be allocated to the remaining partners in their remaining P and L ratio.
d. It should be set up as a receivable and turned over to a collection agency.
2. During liquidation, a partners’ capital account balance drops below zero. What should happen?
a. The other partners should file a legal suit against the partner with the deficit balance.
b. The partner with the highest capital balance should contribute sufficient assets to eliminate the deficit.
c. The deficit balance should be removed from the accounting records with only the remaining partners sharing in future gains and losses.
d. The partner with a deficit should contribute enough assets to offset the deficit balance.
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