When a partnership is liquidated, the assets are sold and the cash realized is applied first to the

Question

Quizplus · Accepted Answer

When a partnership is liquidated, the first priority is to pay off the claims of creditors before distributing any remaining cash to the partners. Therefore, option B is the correct answer. Option A is incorrect because partners' equity accounts are not paid until creditors' claims are fully satisfied. Option C is incorrect because the partner with the largest investment does not have priority over other partners in a liquidation. Option D is partially correct, but it only applies when there is no debt owed to creditors, and all partners have equal ownership interest in the partnership.

When a Partnership Is Liquidated, the Assets Are Sold and the Cash