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JAMB UTME - Principles of Accounts - 2020

Ibeere 1 Ìròyìn

Use the information to answer this question.

..............ZEBRA PLC..............
.............Balance sheet as at 31st March, 2002
...............N...............N............N......
Capital......100,000...Fixed assets:
Current................Land &..................
Liabilities...........buildings..50,000......
Creditors........30000..Furniture..10,000....60,000
.......................Current..................
.......................Assets: .......
..................Stock .........30,000...........
..................Debtors.......30,000.............
..................Cash..........10,000......70,000..
.............130,000.........................130,000
The business was acquired on 1st April, 2002 at a purchase consideration of N120,000 by SOZ. All assets and liabilities were taken over except the cash to open the new firm's bank account additional N20,000 was paid into the bank.

The goodwill on purchase is
Awọn alaye Idahun
The goodwill on purchase is N30,000. Goodwill is an intangible asset that represents the value of a business beyond its tangible assets, such as property, inventory, and equipment. It can be calculated by subtracting the value of a business's assets from the amount paid to acquire it. In this case, the purchase consideration was N120,000 and the value of the assets was N70,000 (N60,000 for fixed assets and N10,000 for cash). Subtracting the value of the assets from the purchase consideration gives us the goodwill amount: N120,000 - N70,000 = N50,000 However, the cash of N10,000 was not taken over and an additional N20,000 was paid into the bank, so we need to subtract these amounts from the goodwill: N50,000 - N10,000 - N20,000 = N30,000 So, the goodwill on purchase is N30,000.
Wo Idahun