Question

30) In case of amalgamation
A)Goodwill of both the firms are ignored
B) Goodwill of both the firms are valued separately
C) Goodwill of both the must be taken at book value
D) Goodwill of both the firm is valued on the basis of old profit
sharing ratio
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Answer 1

Answer:

Goodwill of the both firm must be taken at book value

Answer 2

Answer:

The correct answer is option D, that is, Goodwill is transferred in event of amalgamation, in the old profit sharing ratio basis.

Explanation:

Whenever there is an event of amalgamation of firms between partners, the respective firms has to create an entry for closing entries firm and opening entries firm.

• The closing entries are in respect to the closing firms, to close the account book of amalgamating firm.
• The opening entries are in respect to the opening firm, to open an account book for amalgamated firm.
• Thereby, for creation of goodwill, it is valued for both the firms, on old profit sharing ratio basis.