O-LevelAccountingAccounting procedures7707/11 · May/June 2016 · Q171 Mark

Fran and David are sole traders. They agree to amalgamate their businesses and to share profits and losses equally. Fran's goodwill was valued at $8000 and David's at $6000. How will goodwill be recorded in the books of the new business?

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Aaccount to be debited: Fran $8000, David $6000; account to be credited: goodwill $14000

Baccount to be debited: goodwill $14000; account to be credited: Fran $8000, David $6000

Caccount to be debited: Fran $7000, David $7000; account to be credited: goodwill $14000

Daccount to be debited: goodwill $14000; account to be credited: Fran $7000, David $7000

✓ Correct answer

B: account to be debited: goodwill $14000; account to be credited: Fran $8000, David $6000

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Topic: Accounting procedures, O-Level Accounting (syllabus 7707). Multiple choice, 1 mark.
Source: O-Level Accounting, May/June 2016 Paper 1 Variant 1, question 17.

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