How will the payment made by Theresa be applied?

In partnership law, when a partner, such as Theresa, makes a payment that relates to their obligations to the partnership or to other partners, the application of that payment can depend on various factors, including agreements made among the partners and any existing contractual obligations.

In this context, if the correct answer indicates that the payment will be applied entirely to Martha's credit, it suggests that there is a specific understanding or agreement within the partnership surrounding the payment priorities. This could imply that Martha has a priority claim on that payment based on her role within the partnership or due to particular arrangements made among the partners.

When payments are made, they are often allocated based on the agreements, the nature of the debt, or legal principles like fairness and equity among partners. In this case, the complete allocation to Martha's credit means that the partnership recognizes her contribution or debt as being the priority concern for the payment made by Theresa. This recognition may reflect a practice where partners agree to compensate each other based on their respective entitlements or contributions, thus ensuring that whatever obligations existed towards Martha are satisfied first.

The other choices suggesting that the payment would be split or shared would imply a more mechanical division, possibly not reflecting the specific terms of the partnership agreement or individual payment priorities established among