Use the following information to answer the question below Mr White acquired Mr Black's business for GH¢ 410,000. The total assets were GH¢ 670,000 and liab...

Answer Details

Goodwill is an intangible asset that arises when one business acquires another business. It represents the excess of the purchase price over the net value of the assets acquired. In this case, Mr White acquired Mr Black's business for GH¢ 410,000, while the total assets of the business were GH¢ 670,000 and liabilities amounted to GH¢ 320,000. Therefore, the goodwill in this transaction is GH¢ (410,000 - 350,000) = GH¢ 60,000. To record the goodwill in the books, the double entry would be to debit the goodwill account (an asset account) and credit the purchase of business account (a liability account) for the same amount of GH¢ 60,000. This entry reflects the fact that the goodwill represents an asset for Mr White's business, while at the same time acknowledging that the purchase of the business has increased his liabilities. Therefore, the correct answer is: Goodwill account and credit purchase of business account.