JAMB Accounts Principles of Accounts 2017 Paper

Concept:Goodwill is an intangible asset that arises when a buyer pays more for a business than the fair value of its identifiable net assets.Explanation:Identify all assets: Plant and Machinery $= 190{,}000$, Motor Vehicle $= 170{,}000$, Stock $= 60{,}000$.Total assets $= 190{,}000 + 170{,}000 + 60{,}000 = 420{,}000$.The business also has current liabilities of $50{,}000$, so the net worth of the business is:Net assets $= 420{,}000 - 50{,}000 = 370{,}000$.Goodwill is the difference between the purchase consideration and the net assets acquired:Goodwill $= 400{,}000 - 370{,}000 = 30{,}000$.This $30{,}000$ represents the amount paid for the reputation and earning power of the business beyond its physical assets.Answer:D. ₦30,000