Asked by Michelle Carnes on Jul 24, 2024
Verified
A bonus is paid to the old partners when:
A) the old partner believes the business is worth less than the amounts recorded in the accounting records.
B) the equity of a partnership is worth more than what is recorded in the accounting records.
C) the company's earnings records are less than expected.
D) None of these answers is correct.
Accounting Records
Accounting Records are documents and ledgers that capture all financial transactions of an entity, serving as a basis for financial statements and audit.
- Recognize the effect that injecting funds has on a partner's ownership fraction in a partnership.
Verified Answer
HJ
Hamza JavedJul 29, 2024
Final Answer :
B
Explanation :
A bonus is paid to the old partners when the equity of a partnership is worth more than what is recorded in the accounting records, reflecting the value they've added to the business that isn't fully captured by the accounting records.
Learning Objectives
- Recognize the effect that injecting funds has on a partner's ownership fraction in a partnership.