The bonus method follows a book-value approach. As such, it is conservative as it does not allow for the write-up of asset values. A new partner's capital balance may be less in amount than his or her investment if a bonus is allocated to the previous partners at the time of his or her admission.

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The Bonus Method

Question 17

Multiple Choice

The bonus method

A) is conservative.
B) follows a book-value approach.
C) may result in a new partner's capital balance being less in amount than his or her contribution.
D) All of the above.

Correct Answer: