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 profit 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 correct sequence for the liquidation of a partnership is to first sell noncash assets for cash and recognize any gain or loss on realization (3), then allocate the gain or loss on realization to the partners according to their profit ratios (2), followed by paying off partnership liabilities in cash (1), and finally distributing the remaining cash to partners based on their remaining capital balances (4).

The Liquidation of a Partnership Is a Process Containing the Following