The liquidation of a partnership is a process containing the following steps:
1) Pay partnership liabilities in cash.
2) Allocate the gain or loss on realization to the partners on their income ratios.
3) Sell noncash assets for cash and recognize a gain or loss on realization.
4) Distribute remaining cash to partners on the basis of their remaining capital balances.
Identify the proper sequencing of the steps in the liquidation process.

Question

Quizplus · Accepted Answer

The proper sequencing of the steps in the liquidation process is as follows:
Step 3: Sell noncash assets for cash and recognize a gain or loss on realization.
Step 2: Allocate the gain or loss on realization to the partners on their income ratios.
Step 1: Pay partnership liabilities in cash.
Step 4: Distribute remaining cash to partners on the basis of their remaining capital balances. Therefore, option B is the correct sequencing of the steps.

The Liquidation of a Partnership Is a Process Containing the Following