The JKL partnership liquidated its business in 20X9.Due to an expected long liquidation period,a cash distribution plan was developed.The initial sale and realization of cash from noncash assets resulted in partner K properly getting $24,000.No other partners received cash along with K.Based upon this information,which of the following statements is correct?
I.K's loss absorption potential (LAP)was higher than J's LAP and L's LAP.
II.K's capital balance was substantially larger than the balances of J and L.

Question

Quizplus · Accepted Answer

K receiving cash first suggests K had a higher loss absorption potential, indicating a priority in cash distribution due to a higher risk-bearing capacity or agreement terms, not necessarily a larger capital balance.

The JKL Partnership Liquidated Its Business in 20X9