Neco 2021 Financial Accounting Question 23

Practice objective / multiple choice question 23 from the 2021 Neco Financial Accounting examination.

Neco 2021 Financial Accounting Objective / Multiple Choice Hard Difficulty
Question 23 NECO • 2021 • FINANCIAL_ACCOUNTING • objective

In a partnership, A and B share profit in the ratio 3:2. Their capital balances are \( \text{₦}120,000 \) and \( \text{₦}80,000 \) respectively. The partnership earned a net profit of \( \text{₦}50,000 \) for the year. A new partner C is to be admitted with a 25% share of future profits. Goodwill is valued at two years' average profit, and the existing partners agree to receive goodwill in the ratio of their capital balances. No cash contribution is made by C other than goodwill. Determine (a) the total goodwill payable, (b) the amount of goodwill each existing partner receives, and (c) the new capital balances of A, B and C after admission.

Answer Options

Correct Answer A. Total goodwill = ₦100,000; A receives ₦60,000, B receives ₦40,000; New capital balances - A: ₦180,000, B: ₦120,000, C: ₦100,000.
B. Total goodwill = ₦100,000; A receives ₦70,000, B receives ₦30,000; New capital balances - A: ₦190,000, B: ₦110,000, C: ₦100,000
C. Total goodwill = ₦80,000; A receives ₦48,000, B receives ₦32,000; New capital balances - A: ₦168,000, B: ₦112,000, C: ₦80,000
D. Total goodwill = ₦120,000; A receives ₦72,000, B receives ₦48,000; New capital balances - A: ₦192,000, B: ₦128,000, C: ₦120,000
Correct Answer
A
Correct Option:
Total goodwill = ₦100,000; A receives ₦60,000, B receives ₦40,000; New capital balances - A: ₦180,000, B: ₦120,000, C: ₦100,000.

About This Question

This is Neco 2021 Financial Accounting Question 23. It is one of the objective questions from the 2021 Neco Financial Accounting examination.

Difficulty level: Hard .

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