Question

Building taken over at Rs.
20,000, Machinery Rs. 80,000 creditors
Rs. 80,000, Purchase Price Rs. 40,000,
Goodwill will be Rs.​

Answer 1

Answer:

if debit is short then goodwill account is opened and if credit is short then capital reserves account is opened

Answer 2

Answer:

Goodwill is 20000

Goodwill is an intangible asset.

Journal Entry:

Building A/c----------------Dr     20000

Machinery A/c-------------Dr     80000

Goodwill A/c --------------Dr      20000

          To Creditors A/c                            80000

          To Cash/ Bank A/c                        40000

(Being building, machinery, creditors taken over by the company )

Explanation:

Payments made over and above the assets of the firm termed as goodwill.

Goodwill is the difference of value of the assets taken over and liabilities.

Capital reserve is the difference of value of liabilities taken over and assets.