client bought a beauty salon

client bought a beauty salon

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My client ( a partnership) bought a beauty salon for £5600. The purchase agreement lists some fixed assets included in the sale but there is no breakdown of the total cost of £5600 ( the value of assets not known). Shall the whole cost be qualified as a goodwill? Thank you.

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By johngroganjga
08th Aug 2013 17:26

If they bought fixed assets, and perhaps stock, the purchase consideration will need to be apportioned.

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client bought a beauty salon...

Hi Yvonnel_b,

John is correct.

In simple terms the capitalised earnings value of the business or as in this case the price paid, being £5,600, less the tangible assets, represents the goodwill.

However, consideration will need to be given to the type of goodwill. In this instance personal goodwill may be attributable to the former owner of the beauty salon due to the nature of the business and therefore unable to be sold to your client.

A value of the fixed assets should, at minimum, have been provided in the appendices section of the purchase agreement. 

 

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