In the computation of a partner's Loss Absorption Potential (LAP), which of the following statements is...
In the computation of a partner's Loss Absorption Potential (LAP), which of the following statements is incorrect?
I. The computation of LAPs for all partners allows cash to be distributed before all partnership assets have been sold and all creditors have been paid.
II. The computation of LAPs for all partners indicates the relative strength of each partner's net capital position so that available cash is distributed in respective loss-sharing ratios.
| II |
| Both I and II |
| I |
| Neither I nor II |
Homework Answers
|
Answer ) neither I nor II both the statements are true I. The computation of LAPs for all partners allows cash to be distributed before all partnership assets have been sold and all creditors have been paid. II. The computation of LAPs for all partners indicates the relative strength of each partner's net capital position so that available cash is distributed in respective loss-sharing ratios. |
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