Question
When comparing the bonus and goodwill methods, which is Not True related to the recording of admission of a new partner by investment of new
When comparing the bonus and goodwill methods, which is Not True related to the recording of admission of a new partner by investment of new capital?
Both the bonus and goodwill methods deal with the presence of unrecorded assets in the new partnership, as indicated by the amount invested by the new partner. While the bonus method recognizes a new basis of asset valuation when a new partner invests assets in the partnership, the goodwill method does not. The goodwill method will typically result in a larger total partnership capital than the bonus method. When the investment by the new partner exceeds that partner's share of the firm's total capital, the existing partners will receive either a bonus or goodwill, depending on whether the bonus or goodwill method is used.
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