passwella.
Menu

JAMB Principles of Accounts 2013 Question 37

Question 37

Purchase of Business

The purchase consideration that is lower than the net asset implies that, the buyer has gained the advantage of

  1. A.net income.
  2. B.revenue reserve.
  3. C.capital reserve
  4. D.net loss.
Show the answer and explanation

Answer: C (capital reserve)

Explanation

Paying less than the net assets are worth gives a gain (negative goodwill) that is put to capital reserve.