Question

State the following statement is true:

On the dissolution of a firm, goodwill will be sold like any other asset.

Answer 1

This statement is true.

Explanation:

During the dissolution of a firm, goodwill is treated as an asset and, like any other asset, it must be sold or valued. The value of goodwill is typically shared among the partners as part of the final settlement. If the goodwill is not to be physically sold to an external party, it is often adjusted in the partners’ capital accounts based on their agreed-upon share of its value. So, while the process may not involve an external sale, goodwill is still treated as an asset to be distributed among the partners during the dissolution process.