Question

Which of the following statements is true concerning the distribution of safe payments? The distribution of safe payments assumes that any capital deficit balances will prove to be a total loss to the partnership. Safe payments are equal to the recorded capital balances of partners with positive capital balances. The distribution of safe payments may only be made after all liabilities have been paid. In computing safe payments, partners with positive capital balances are assumed to absorb an equal share of any deficit balance(s). There are no safe payments until the liquidation is complete.

Answer 1

Answer:

The distribution of safe payments assumes that any capital deficit balances will prove to be a total loss to the partnership

Explanation:

When the capital ratio and the profits sharing ratio in a partnership are the equal to each other, it is from the profits that the capital deficits will then be balanced. Then in the cash distribution, this will make the partner that has the highest capital loss to have priority in the cash distribution.

When the partners then request for a distribution before all of the partnership assets are sold, schedule of safe payment is prepared.

Hence, The distribution of safe payments assumes that any capital deficit balances will prove to be a total loss to the partnership is true concerning the distribution of safe payment.

Answer 2

Answer: A

Explanation:

The distribution of safe payments assumes that any capital deficit balances will prove to be a total loss to the partnership. If the capital ratio and profits sharing ratio are same, any capital deficit will be balanced from the profits. It is gives the partner with the highest capital loss priority in cash distribution.

A schedule of safe payment is prepared when partners desire a distribution before all of the partnership assets are sold.