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JAMB Principles of Accounts 1994 Question 35

Question 35

Partnership Admission, Retirement and Dissolution

Goodwill appears in the books of a business only if it has been

  1. A.purchased at a certain price
  2. B.raised in connection with the admission of a new partner
  3. C.raised to account for the true value of a business on the death of a partner
  4. D.raised in order to prevent the balance sheet showing that the business is insolvent.
Show the answer and explanation

Answer: A (purchased at a certain price)

Explanation

Goodwill can only be measured reliably when a price has actually been paid for it, so purchased goodwill is what normally appears in the books.