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WAEC Financial Accounting 2015 Question 37

Question 37

Purchase of Business

Mr. White acquired Mr. Black's business for GH¢410,000. The total assets were GH¢670,000 and liabilities amounted to GH¢320,000.
How much was paid for goodwill?

  1. A.GH¢ 350,000.
  2. B.GH¢ 260,000.
  3. C.GH¢ 90,000.
  4. D.GH¢ 60,000.
Show the answer and explanation

Answer: D (GH¢ 60,000.)

Explanation

Net assets = 670,000 - 320,000 = GH¢350,000; goodwill = 410,000 - 350,000 = GH¢60,000.