A Partnership Admits a New Partner

question 103

Multiple Choice

A partnership admits a new partner.The new partner invests $70,000 in the business and receives a credit of $90,000 to his capital account.The difference of $20,000 is called a(n) :

• A)admission fee.
• B)partnership expense.
• C)bonus.
• D)illegal activity.

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Definitions:

Contribution Margin Ratio

A metric that shows what percentage of sales revenue is available to cover variable costs and contribute to fixed costs after all variable expenses have been covered.

Cost Structure

The composition of fixed and variable costs that a company incurs during the production of goods or services, affecting profitability.

CVP Chart

A graphical representation used in Cost-Volume-Profit analysis to show the relationship between costs, volume of sales, and profit.

Major Components

Principal parts or elements that form the larger system or structure.