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WAEC Financial Accounting 1997 Question 11

Question 11

Partnership Admission, Retirement and Dissolution

In a partnership goodwill is recognized when

  1. A.a new partner is admitted
  2. B.a partner is dormant
  3. C.the business is making huge profit
  4. D.the business has good customer relations
  5. E.It is a limited partnership.
Show the answer and explanation

Answer: A (a new partner is admitted)

Explanation

Goodwill is valued and brought into account when the partnership changes, for example on admitting a new partner.