Question
Which of the following statements is false concerning a comparison of the bonus and goodwill methods of recording admission of a new partner by investment
Which of the following statements is false concerning a comparison of the bonus and goodwill methods of recording admission of a new partner by investment of new capital?
1. The goodwill method will typically result in a larger total partnership capital than the bonus method.
2. 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.
3. 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.
4. 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.
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