Why should a new partner contribute towards goodwill on his admission?
A It is a norm
B to ensure new partner also have a stake in the business
C the firm into which he is entering already has some goodwill in the market
D to purchase the business
Answer is C
When a new partner pays Goodwill it is usually because the partnership he/she is entering into already has goodwill in the market as well as to pay for the portion sacrificed by existing partners in form to their profit to on-board the new partner.
