When a partner dies, the capital account balances of the remaining partners may increase, decrease, or...
When a partner dies, the capital account balances of the remaining partners
may increase, decrease, or remain the same
will decrease
will increase
will remain the same
Homework Answers
Answer is may increase , decrease , or remain the same.
Explanation:
For example, if a capital account balance of partners A, B , C are $50000 each and if C dies, in these case the capital balance of C will be paid to his nominee or legal heir, and there is no effect on capital balance of remaining partner. Hence, capital account balance of A and B remain same even if C dies.
Now say there is no legal hier or nominee of deceased partner C then in this situation, remaining partner will take over his capital in agreed ratio and capital account of A and B will increase.
The last situation may arise that if there is an agreement between the partners and such agreement states that if any partner dies then in that case, final payment will be made to his legal hier or nominee (as the case may be) is equal to capital account balance of deceased partner plus incentive ,this additional amount will be borne by remaining partner in their capital ratio . Hence, capital account balance of A and B will decrease.
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