A Sharing of Profits from the Sale of the Goodwill

question 25

True/False

A sharing of profits from the sale of the goodwill of a business creates a presumption that a partnership exists.

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Definitions:

Cost Method

An accounting method used to value an investment, where the investment is recorded at its acquisition cost without reflecting changes in market value.

Acquisition Differential

The difference between the purchase price of a company and the fair value of its identifiable net assets.

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and adjusted thereafter for the investor's share of the investee's profits or losses.

Consolidated Net Income

The total net income of a parent company and its subsidiaries after accounting for minority interests, representing the overall profitability of the entire corporate group.