Accounting Multiple Choice Question – 30 August 2023

Alex, a sole trader sold his business to a limited company Lucy Ltd on 31 March 2023.

The net assets of Alex’s business had a total book value of £160,000 and a total fair value of £200,000.

The consideration for the sale was satisfied by the issue of 200,000 £1 ordinary shares (worth £1.25 each) and a cash payment of £20,000.

What is the amount of goodwill arising on the transfer?

Select ONE answer:

1. £20,000
2. £60,000
3. £70,000
4. £110,000

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 – 200,000 shares * £1.25 + £20,000 cash – £200k fair value
4. Not correct

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