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WAEC Financial Accounting 2016 Question 44

Question 44

Purchase of Business

In the purchase of a business, a buyer has paid more than the value of the net assets of the business. The excess payment is referred to as

  1. A.bonus.
  2. B.goodwill.
  3. C.net profit.
  4. D.premium.
Show the answer and explanation

Answer: B (goodwill.)

Explanation

The amount paid above the value of net assets is goodwill.