Day: February 1, 2023

Alex Ltd acquires the whole of the net assets of Lucy and Co., an unincorporated business, for £450 000 in cash and £200 000 in shares.

The book values and fair values of Lucy and Co. at the time of acquisition are shown.

   net book value (£)  fair value (£)

fixed assets   235 000   315 000

current assets   465 000    290 000 

current liabilities   (197 000)     (230 000) 

   503 000   375 000

What is the value of the goodwill arising on acquisition?

Select ONE answer:

1. £75,000
2. £128,000
3. £147,000
4. £275,000

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 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > £450K + £200k = £650k – £375k == > £275k

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