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JAMB Principles of Accounts 2001 Question 39

Question 39

Purchase of Business

Given:
(₦)
Capital 200,000
Liabilities 10,000
Total 210,000
Total assets 210,000
If the business is purchased at a price including a goodwill of ₦20,000, what must have been the purchase price?

  1. A.₦190,000
  2. B.₦210,000
  3. C.₦220,000
  4. D.₦230,000.
Show the answer and explanation

Answer: C (₦220,000)

Explanation

Net assets = 210,000 − 10,000 = 200,000. Purchase price = 200,000 + goodwill 20,000 = ₦220,000.