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) Must be paid because the partnership contract has unlimited life.
D) Legally becomes a liability of the general partner.
E) Is an expense of the business.

Question

Quizplus · Accepted Answer

Interest allowance can help balance out unequal capital contributions by providing a return on each partner's investment, ensuring fairness in profit distribution.

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