Nick Is Admitted to an Existing Partnership by Investing Cash

question 151

Multiple Choice

Nick is admitted to an existing partnership by investing cash. Nick agrees to pay a bonus for his ownership interest because of the past success of the partnership. When Nick's investment in the partnership is recorded,

• A) his capital account will be credited for more than the cash he invested
• B) his capital account will be credited for the amount of cash he invested
• C) a bonus will be credited for the amount of cash he invested
• D) a bonus will be distributed to the old partners' capital accounts

---

Definitions:

Credit To Inventory

An accounting entry that increases the inventory asset account due to purchases on credit.

Perpetual Inventory System

An automated inventory management system which promptly registers inventory transactions during sales or purchases through digital point-of-sale systems and enterprise asset management software.

Purchases Returns

Transactions involving the return of goods previously bought to the supplier, often due to defects, inaccuracies, or other reasons, leading to a refund or credit note.

Accounts Payable

Liabilities of a business that are owed to creditors for goods and services purchased on credit and are due within a short period, typically less than a year.