8.4 Buy paid Mr Sale £120,000 cash to acquire his business, Sale & Co., as a going concern on 1 January 20X1. The assets taken over were considered to be worth the following amounts:

£

Fixed assets 71,500 Stock 20,000 Debtors 10,000 In addition, Buy assumed responsibility for paying Sale & Co.’s outstanding creditors, which amounted to £5,000. The policy of Buy is to write off goodwill over a five-year period.

(a) Calculate the goodwill arising on the acquisition of Sale & Co.

(b) Show how goodwill will appear in the balance sheet of Buy Ltd as at 31 December 20X1.