JAMB Accounts Principles of Accounts 2018 Paper

Concept:When buying a business, the extra amount paid above its net assets is recorded as goodwill.Explanation:Net assets equal the difference between the business's total assets and its liabilities.If the purchase price is greater than the net assets, the excess is the value of the business's reputation, customer base, and other intangible benefits.This excess is called goodwill.In the books of the buyer, goodwill is recognised as an asset.Therefore, the purchase of the business is recorded by debiting the goodwill account with the excess amount.Answer:C. goodwill account.