O-LevelAccountingAccounting procedures7707/11 · May/June 2014 · Q211 Mark

X and Y are sole traders. They decide to form a partnership and agree to share profits and losses equally. Goodwill is valued as follows. X's business $2000 Y's business $0 How is goodwill recorded in the ledger of the partnership?

Aaccount(s) to be debited: goodwill $2000, account(s) to be credited: capital X $1000, capital Y $1000

Baccount(s) to be debited: capital X $1000, capital Y $1000, account(s) to be credited: goodwill $2000

Caccount(s) to be debited: capital X $2000, account(s) to be credited: goodwill $2000

Daccount(s) to be debited: goodwill $2000, account(s) to be credited: capital X $2000

✓ Correct answer

D: account(s) to be debited: goodwill $2000, account(s) to be credited: capital X $2000

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Topic: Accounting procedures, O-Level Accounting (syllabus 7707). Multiple choice, 1 mark.
Source: O-Level Accounting, May/June 2014 Paper 1 Variant 1, question 21.

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