When a New Partner Is Admitted to a Partnership

question 89

Multiple Choice

When a new partner is admitted to a partnership

• A) a bonus may be attributable to the old partner
• B) a bonus may only result from more cash being given by the new partner than the value of the of the assets being purchased
• C) a bonus agreed upon by the partners is recorded as an asset so long as the amount is within the range set by the SEC
• D) a bonus is not recorded

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Definitions:

Excess Burden

The economic cost to society exceeding the revenue generated by a tax, often resulting from distortions in market behavior.

Economic Decisions

The choices made by individuals, businesses, governments, and other groups that affect the allocation of resources and the distribution of goods and services.

Excess Burdens

The economic inefficiencies that result from implementing a tax, often causing changes in consumption and production behaviors that lead to a loss in social welfare.

Nonneutral Taxes

Taxes that affect economic choices, potentially leading to inefficiencies or changes in market behavior, unlike neutral taxes which do not alter decision-making.