Concept:Goodwill is entered into partnership books when a change occurs in the firm's membership or profit-sharing arrangement.
Explanation:Goodwill is an intangible asset that represents a firm's reputation and its ability to earn above-average profit.
In partnership accounting, goodwill is not recorded simply because the business makes super profit.
It is properly created in the books when a new partner is admitted into the firm.
At that time, the incoming partner usually brings a premium for goodwill to compensate the old partners.
The old partners then share this premium in their old profit-sharing ratio.
This entry is what makes goodwill appear in the books of the partnership.
Super profit is only a valuation tool used to compute the amount of goodwill, not the reason for recording it.
Business expansion or heavy losses do not lead to the creation of goodwill in the firm's books.
Answer:B. A new member is admitted.