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### VALUATION OF GOODWILL

Q. 1. The excess amount which the firm can get on selling its assets over and above the saleable value of its assets is called :

(a)Surplus

(b) Super profits

(c) Reserve

(d) Goodwill

Ans: (d) Goodwill

Q. 2.  Goodwill of the firm on the basis of 2 years' purchase of average profit of the last 3 years is Rs. 25,000. Find  average  profit.

(a)    Rs. 50,000

(b)   Rs. 25,000

(c)  Rs. 10,000

(d)  Rs. 2,500

Ans: (d) Rs. 2,500

Q.3. Which of the following items are added to previous year’s profits for finding normal profits for valuation of goodwill.?

(a)  Loss on sale of fixed assets

(b)  Loss due to fire, earthquake etc

(c)  Undervaluation of closing stock

(d)  All of the above

Ans: (d) All of the above

Q.4. What are super profits

(a) Actual profit – Normal Profit

(b) Normal Profit - Actual profit

(c) Actual profit + Normal Profit

(d)None of the above

Ans: (a) Actual profit – Normal Profit

Q.5.     Goodwill is ____

(a)  tangible asset

(b)   intangible asset

(c)    fictitious asset

(d)    both (b) & (c)

Ans: (b) Intangible asset

Q.6. Following are the methods of calculating goodwill except:

(a) Super profit method

(b) Average profit method

(c) Weighted Average profit method

(d) Capital profit method

Ans : (d) Capital profit method

Q.7 Calculate the value of goodwill at 3 years' purchase when: Capital employed Rs. 2,50,000; Average profit Rs. 30,000 and normal rate of return is I0%.

(a) Rs. 3000

(b) Rs. 25,000

(c) Rs. 30,000

(d) Rs. 5,000

Ans: (d) Rs5,000

Q.8 . The goodwill of the firm is not affected by:

(a) Location of the firm

(b) reputation of the firm

(c)Better customer services

(d)None of the above

Ans : (b) reputation of the firm

Q. 9 Weighted average profit method of calculating goodwill is used when:

(a) Profits are not equal

(b) Profits show a trend

(c) Profits are fluctuating

(d)None of the above

Ans: (b) Profits show a trend

Q. 10. When Goodwill is not purchased goodwill account can :

(a) Never be raised in the books

(b) Be raised in the books

(c)Be partially raised in the books

(d)Be raised as per the agreement of the partners

Ans: (a) Never be raised in the books

Q.11. Capital invested in a firm is  Rs. 5,00,000.Normal rate of return is 10% .Average profit of the firm are 64,000(after an abnormal loss of Rs. 4,000).Value of goodwill at four times the super profits will be:

(a) Rs.72,000

(b) Rs. 40,000

(c) Rs. 2,40,000

(d) Rs. 1,80,000

Ans:  (a) Rs.72,000

Q.12. The net assets of the firm including fictitious assets of 5,000 are 85,000.The net liabilities of the firm are 30,000.The normal rate of return is 10% and the average profits of the firm are 8,000.Calculate the goodwill as per capitalization of super profits.

(a) Rs.20,000

(b) Rs. 30,000

(c) Rs. 25,000

(d) None of the above

Ans: (b) Rs. 30,000

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