Accounting Multiple Choice Question – 17 August 2022

Big Ltd buys the business of Little Ltd with an issue of 400 000 shares of £1.00 each at a premium of £0.25 and £100 000 in cash.

The table shows an extract from the balance sheet of Little Ltd.

• fixed assets – £260k
• current assets – £80k
• current liabilities – £50k

How much is paid for Goodwill for Little Ltd by Big Ltd?

Select ONE answer:

1. £210 000
2. £260 000
3. £310 000
4. £340 000

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 – 400,000 * £1.25 = £500K + £100K = £600k – (£260k + £80k – £50k) = £310,000
4. Not correct

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