Outside creditors enjoy priority claim-true or false

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Reference no: EM132796319

TRUE OR FALSE

Question 1. A debit balance exists in a partner's capital account just prior to liquidation. This means that a mistake was made in the books, because capital accounts must have credit balances.

Question 2. Non-cash assets that are not sold should be written off as a loss and such loss is divided to the partners equally.

Question 3. Outside creditors enjoy priority claim to partnership assets over partners.

Question 4. The entry to record the exercise of offset will be debit the partner's loan account and credit cash.

Question 5. The partner is solvent when his personal assets exceed his personal liabilities while the partner is insolvent when his personal liabilities exceed his personal assets.

Question 6. When a partnership goes out of business, all the remaining non-cash assets will be declared as a total loss. This loss on liquidation shall be divided among the partners in their profit and loss ratio.

Question 7. The Trust Fund Doctrine, shall be applied whenever the partnership and/or one of the partners are insolvent.

Question 8. If partnership creditors are not fully paid out of partnership assets they have claim against the personal assets of any partner who has personal assets remaining after satisfying his personal creditors.

Question 9. There is a gain on realization when the noncash assets of the partnership are sold more than their recorded value.

Question 10. The personal assets of the partners are used first to settle their personal obligations before they are used to satisfy the claims of the partnership creditors.

Reference no: EM132796319

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