When an Existing Partner Sells Interest in the Partnership and Goodwill

question 38

Multiple Choice

When an existing partner sells interest in the partnership and Goodwill is recognized, what is the likely entry made:

• A)​Debit Expense
• B)​Debit selling partners' Drawing
• C)​Debit Capital
• D)Debit cash​

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Definitions:

Acquisition Transaction

The process by which one company purchases most or all of another company's shares or assets, effectively taking control of the target company.

Common Stock

A type of ownership in a corporation, representing a claim on part of the company's assets and earnings.

Contingent Consideration

An obligation of a buyer to transfer additional assets or equity interests if future events occur or conditions are met after a business combination.