A partnership is formed with four partners. Each partner invests net assets with

Question

A partnership is formed with four partners. Each partner invests net assets with a different fair value, but they are each given a 25% capital percentage. Which of the following statements is true? (Points : 1) Using the bonus method, the partners will have different initial capital balances. Total capital balances will be the same whether the bonus or goodwill method is used. The capital balances will be equal regardless of whether the bonus or goodwill method is used. Because the investments are unequal, it is not possible to set each partner's capital balance equal to the amount invested.

Explanation / Answer

Ans - 1) Using the bonus method, the partners will have different initial capital balances.

because in in Bonus method Net assets are not revalued & therefore a transfer of capital balances between partners happens

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