WAEC Accounting 2015 Paper

Concept:Goodwill is the extra amount paid over the net assets of a business when it is bought as a going concern.Explanation:First, calculate the net assets acquired.Net assets $=$ Total assets $-$ LiabilitiesNet assets $=$ $\text{GH¢}\,670{,}000 - \text{GH¢}\,320{,}000 = \text{GH¢}\,350{,}000$Next, find the goodwill.Goodwill $=$ Purchase consideration $-$ Net assetsGoodwill $=$ $\text{GH¢}\,410{,}000 - \text{GH¢}\,350{,}000 = \text{GH¢}\,60{,}000$In the books of Mr White, goodwill is an intangible asset, so it is debited.The credit is made to the purchase of business account because it completes the total purchase price recorded.Thus, the double entry is:Debit Goodwill account and credit Purchase of Business account.Answer:B. Goodwill account and credit purchase of business account.