Introduction to Mergers and acquisisions

1. What does goodwill represent in a partnership?

• A. Cash invested by partners

• B. Value of fixed assets

• C. Reputation and earning potential of the firm

• D. Capital contributed by new partner

2. If a new partner brings goodwill in cash, how is it shared among old partners?

• A. In the new profit-sharing ratio

• B. Equally

• C. In the capital ratio

• D. In the sacrificing ratio

3. What is the journal entry for goodwill brought in cash by a new partner?

• A. Bank A/C Dr. To Goodwill A/C

• B. Bank A/C Dr. To Capital A/C

• C. Bank A/C Dr. To Old Partners’ Capital A/Cs

• D. Goodwill A/C Dr. To Bank A/C

4. If goodwill is not brought in cash, how is it adjusted?

• A. Adjusted in capital accounts of old partners

• B. Ignored

• C. Paid from reserve

• D. Added to revaluation account

5. When an asset increases in value during revaluation, what is the entry?

• A. Revaluation A/C Dr. To Asset A/C

• B. Asset A/C Dr. To Revaluation A/C

• C. Capital A/C Dr. To Asset A/C

• D. Asset A/C Dr. To Capital A/C