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WAEC Financial Accounting 2019 Question 14

Question 14

Partnership Admission, Retirement and Dissolution

Goodwill is recognized in partnership when

  1. A.the business makes a huge profit.
  2. B.the business has adequate bank balance.
  3. C.a partner is dormant.
  4. D.a new partner is admitted.
Show the answer and explanation

Answer: D (a new partner is admitted.)

Explanation

Goodwill is valued when the partnership changes, e.g. on admission of a partner.