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WAEC Financial Accounting 2014 Question 36

Question 36

Purchase of Business

When the purchase consideration exceeds the value of business, the difference is

  1. A.profit.
  2. B.discount.
  3. C.goodwill.
  4. D.reserve.
Show the answer and explanation

Answer: C (goodwill.)

Explanation

Paying more than the value of the net assets acquired gives goodwill.