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.

Question

Quizplus · Accepted Answer

The interest allowance can help balance out the differences in capital contributions among partners, ensuring that those who invest more receive a return on their investment, even if profits are distributed equally.

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