Deck 6: Valuation and Calculation of Goodwill

Question 1

From the profits of previous three years, Rs 150000, Rs 200000, and Rs250000/- the valueof goodwill at five years of purchase is -----------

A)Rs12,50,000/-
B)Rs 7,50,000/-
C)Rs10,00,000/-
D)all

Answer 1

Rs10,00,000/-

Question 2

From the profits of previous three years, Rs 150000, Rs 300000, and Rs250000/- and the loss in a year ( Rs. 100000/-) the value of goodwill at three years of purchase is ---------

A)Rs 8,00,000
B)Rs 6,00,000
C)Rs 4,50,000
D)all

Answer 2

Rs 4,50,000

Question 3

If Average Profit of a certain firm for last five years is Rs5,00,000 , Normal profit is Rs 3,50,000/-. What would be the Value of Goodwill at 3years purchase of super profit

A)Rs 8,00,000
B)Rs 6,00,000
C)Rs 4,50,000
D)all

Answer 3

Rs 4,50,000

Question 4

Goodwill is defined as

A)Intangible asset
B)Fictitious asset
C)Current asset
D)Current asset.

Question 5

Weighted average 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

Question 6

The total capital employed in the company is ?8,00,000 a reasonable rate of return is 15%and the profit of the year is 412,00,000. The value of goodwill of the company as per thecapitalization method will be

A)82,00,000
B)1200000
C)7200000
D)4200000

Question 7

A firm earns ?1,00,000. The normal rate of return is 10%. The assets of the companyamounted to ?11,00,000 and liabilities to ?1,00,000. Value of goodwill by the capitalization of average actual profit will be

A)2,00,000
B)10000
C)5000
D)100000

Question 8

If the amount of super profit is negative ,what des it indicate

A)There is no goodwill
B)There is average goodwill
C)Both
D)None

Question 9

Which goodwill is recorded in the books of Accounts

A)Purchase Goodwill
B)Self Generated
C)Both
D)None

Question 10

When does need valuation of Goodwill

A)On retirement or Death of a partner
B)Admission of Partner
C)None of the Above
D)Both

Question 11

Which methods of valuation of Goodwill

A)Super Profit
B)Capitalization
C)Average Profit
D)All of the Above

Question 12

Which factor affecting th value of Goodwill

A)Quality of Product
B)Location of business.
C)Efficient management
D)All of the Above

Question 13

The profits of the last three years is 42000, 39000,45000. Value of goodwill of 2 years purchase of average profit is

A)84000
B)42000
C)126000
D)None

Question 14

What do you mean by Super Profit

A)Average profit - Normal profit
B)Total Profits/ No. of Years
C)Average profit + normal profits
D)None of the above

Question 15

The excess of Average profit over normal profit is called

A)Super profit
B)Normal profit
C)Fixed profit
D)Abnormal profit

Question 16

The monetary value of reputation of business is called

A)Goodwill
B)Suer profit
C)Surplus
D)None of the above

Question 17

The profits of the last three years is55000,50000,45000. Value of goodwill of 2 yearspurchase of average profit is

A)100000
B)42000
C)126000
D)None

Question 18

Which methods of valuation of Goodwill

A)Super profits
B)Average profits
C)Both
D)None

Question 19

Goodwill is an intangible Assets

A)True
B)False
C)none
D)all

Question 20

Goodwill be purchased

A)True
B)False
C)none
D)all

Question 21

Goodwill will have no effect on business Financial status

A)True
B)False
C)none
D)all

Question 22

What is Royalty?

A)A payment is made for the use of Assets
B)A fixed payment for the use of Fixed Assets
C)Payment made by owners
D)None of the above

Question 23

Mining Royalty is based on

A)Production
B)Sales
C)Purchase
D)Both A and B

Question 24

Patent Royalty is based on

A)Production
B)Sales
C)Purchase
D)Both A and B

Question 25

Copyright royalty is based on

A)Sales
B)Production
C)Purchase
D)Both A and B