Day: February 9, 2023

The net assets of Lucy Ltd are shown below.

• net assets at original cost – £100M
• net book value – £50M
• fair value – £70M

Alex plc pays £100M cash plus £20M in shares for all the net assets.

What will the annual goodwill amortisation charge be if Alex plc applies a ten year economic life to goodwill?

Select ONE answer:

1. £2M
2. £3M
3. £5M
4. £7M

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 == > £100M + £20M – £70M = £50M / 10 years === > £5M p.a.
4. Not correct

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