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WAEC Accounting 2015 Paper

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Question : 39

Total: 50

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 liabilities amounted to GH¢ 320,000.

How much was paid for goodwill?

GH¢ 350,000
GH¢ 260,000
GH¢ 90,000
GH¢ 60,000

Solution:

Concept:

Goodwill is the excess of the purchase price over the net assets acquired.

Explanation:

First, calculate the net assets of the business.

Net assets = Total assets

-

Liabilities =

\text{GH¢}670{,}000 - \text{GH¢}320{,}000 = \text{GH¢}350{,}000

.

Then subtract the net assets from the purchase price to find goodwill.

Goodwill = Purchase price

-

Net assets =

\text{GH¢410,000} - \text{GH¢350,000} = \text{GH¢60,000}

.

Answer:

D. GH¢ 60,000

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