Treatment and Valuation of Goodwill

Match each goodwill transaction or valuation method in partnership accounts with its corresponding accounting treatment or valuation rule.

Adamu and Zainab are partners in a firm. They agree to value the firm's goodwill on the basis of $3$ years' purchase of the average super profit of the past $4$ years. The net profits of the firm for the last $4$ years were $\mathcal{N}45,000$, $\mathcal{N}55,000$, $\mathcal{N}60,000$, and $\mathcal{N}80,000$. The capital employed in the business is $\mathcal{N}400,000$, and the normal rate of return expected on capital employed in a similar business is $10\%$. What is the value of the firm's goodwill in Naira?

Kemi and Tunde are partners in a firm sharing profits and losses in the ratio of $3:2$. On 1st January 2025, they admit Bisi into the partnership, and the new profit-sharing ratio among Kemi, Tunde, and Bisi is agreed at $5:3:2$. Goodwill is to be valued at $3$ years' purchase of the super profit of the firm. The average annual profit of the firm for the past four years is $\mathcal{N}45,000$, while the normal annual profit expected on capital employed is $\mathcal{N}25,000$. If goodwill is raised in the books and immediately written off, what is the net adjustment to Tunde's Capital Account?

Ngozi and Bello are partners in a firm sharing profits and losses in the ratio of $3:2$. They admit Emeka into the partnership for a $\frac{1}{4}$ share of future profits. Emeka pays $\mathcal{N}20,000$ in cash as his share of premium for goodwill, which is to be retained in the business. Which of the following correctly describes the ledger entry required to credit the existing partners for the goodwill premium?

Chidi and Obinna are partners in a firm sharing profits and losses in the ratio of $3:2$. They admit Farooq into the partnership, and the new profit-sharing ratio among Chidi, Obinna, and Farooq is agreed as $2:2:1$. The goodwill of the firm is valued at $\mathbb{N}50,000$, and the partners decide to write off the goodwill account immediately. Which accounting entry correctly records the write-off of goodwill?

Match each partnership goodwill scenario upon the admission of a new partner with its correct accounting entry treatment in the ledger books.

Match each goodwill valuation method or accounting treatment in partnership accounts on the left with its corresponding description or journal entry rule on the right.

Ada and Babatunde are existing partners in a firm sharing profits and losses in the ratio of $3:2$. Upon the admission of a new partner, the firm's goodwill is valued at $\text{₦}50,000$ and is to be raised in the accounts. How much goodwill should be credited to the capital accounts of Ada and Babatunde respectively?

Ade and Bola are partners in a business sharing profits and losses in the ratio of $3:2$. They agree to admit Chidi into the firm with a $\frac{1}{5}$ share of future profits. The firm's goodwill is valued at $\text{N}50,000$. If goodwill is raised in the books of the firm and immediately written off, what is the net financial effect on Bola's capital account?

Kemi and Emeka are partners in a firm sharing profits and losses in the ratio of $3:2$. The profits of the firm for the past four years were $\text{N}180,000$, $\text{N}220,000$, $\text{N}240,000$, and $\text{N}200,000$ respectively. The capital employed in the firm is $\text{N}1,200,000$, and the normal rate of return expected on capital employed in this industry is $12\%$. Goodwill is valued at $3$ years' purchase of the super profit. Fola is admitted as a new partner for a $\frac{1}{6}$ share in profits, with the new profit-sharing ratio agreed as $3:2:1$. If goodwill is adjusted through the capital accounts without opening a goodwill account, what is the net credit amount (in Naira) to Emeka's capital account for goodwill?

Match each goodwill scenario or valuation method in partnership accounting on the left with its corresponding accounting treatment or formula on the right.

Efe and Kemi are partners sharing profits and losses in the ratio of $3:1$. They admit Segun into the firm, giving him a $\frac{1}{5}$ share of future profits. The firm's goodwill is valued at $\text{₦}60,000$, and the partners agree that goodwill will be raised and immediately written off. What is the net entry required in Efe's capital account?

Match each goodwill accounting method or transaction scenario on the left with its correct valuation basis or ledger treatment on the right.

The net profits of a partnership firm for the last three years were $\text{₦}70,000$, $\text{₦}80,000$, and $\text{₦}90,000$. If goodwill is to be valued at $2$ years' purchase of the average annual profit of the past three years, what is the total value of the firm's goodwill in Naira?

Tunde and Wole are partners in a business sharing profits and losses in the ratio of $3:2$. They agree to admit Musa into the partnership for a $\frac{1}{6}$ share of future profits. On Musa's admission, goodwill is valued at $\text{₦}60,000$. If goodwill is raised in the old profit-sharing ratio and immediately written off in the new profit-sharing ratio, what is the net adjustment to Tunde's capital account?