Question

When a partnership is liquidated on a piecemeal basis and cash has been distributed properly to all partners as noncash assets have been turned into cash, all future cash distributions should be made:

1) In the profit and loss ratio.
2) According to the balances in the partners' capital accounts.
3) Cannot be determined.
4) None of the above.

Answer 1

Future cash distributions, after liquidating a partnership on a piecemeal basis, should be made according to the balances in the partners' capital accounts, reflecting their ownership and any final settlement of the accounts.

Step-by-step explanation:

When a partnership is liquidated on a piecemeal basis and cash has been distributed properly among all partners as noncash assets have been converted to cash, all future cash distributions should be made according to the balances in the partners' capital accounts. This method ensures that each partner receives an amount of cash that reflects their ownership stake and the final balance of their capital account after all the assets have been liquidated and all debts have been paid. It's important to note that this distribution is aligned with the agreement set forth in the partnership agreement, which may specify particular ratios for profit and loss distribution, but upon liquidation, the actual capital accounts' balance is the basis for the distribution.