The Bonus and Goodwill Methods of Recording the Admission of a New

question 39

Multiple Choice

The bonus and goodwill methods of recording the admission of a new partner will produce the same result if the:

• A) new partner's profit-sharing ratio equals his capital interest
• B) old partners' profit-sharing ratio in the new partnership is the same relatively as it was in the old partnership.
• C) both new partner's profit-sharing ratio equals his capital interest and old partners' profit-sharing ratio in the new partnership is the same relatively as it was in the old partnership are met
• D) none of these.

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Definitions:

Period Costs

Expenses that are not directly tied to production and are expensed on the income statement in the period they are incurred, such as selling and administrative expenses.

Prepaids Insurance

Prepaid insurance refers to insurance premiums that are paid in advance and represent a future economic benefit for the period they cover.

Prime Costs

The combined costs of direct materials and direct labor that are directly involved in the production of goods.

Incurred

Refers to costs or expenses that have been realized or experienced by a business as a result of its operations.