Which of the following statements is (are)true?
I.In the calculation of the loss absorption power for a partner,a partner's loan balance (an amount that is owed by the partnership)should be added to the partner's capital balance.
II.In liquidation,a partner's loan balance (an amount that is owed by the partnership)should be paid to the partner as a creditor of the partnership after the outside creditors.

Question

Quizplus · Accepted Answer

Both statements are true. A partner's loan balance is considered a liability of the partnership, and therefore should be added to the partner's capital balance when calculating the loss absorption power. In liquidation, a partner's loan balance should be paid to the partner as a creditor of the partnership after the outside creditors.

Which of the Following Statements Is (Are)true