Day: May 23, 2020

In the accounts of a company, goodwill (when it exists) . . . ?

Select ONE answer:

1. must be a debit balance.
2. must be a credit balance.
3. can be either a debit or a credit balance.
4. None of the above.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – Goodwill is the difference between the sum of the fair values of individual assets and liabilities and their purchase price. This difference can be either positive (in which case goodwill will be a debit balance) or negative (in which case goodwill will be a credit balance), depending on the purchase price.
4. Not correct

 

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